Union Resources LimitedABN 40 002 118 872Annual Reportfor the...

Union Resources Limited
ABN 40 002 118 872
Annual Report
for the year ended 30 June 2006
Contents
Page
Corporate directory
1
Directors' report
2
Auditors' independence declaration
15
Corporate governance statement
16
Financial report
19
Directors' declaration
63
Audit report
64
Shareholder information
66
Union Resources Limited
Corporate directory
Directors
Ian James Burton
Chairman, Non Executive Director
Robert Boutflower Murdoch
Managing Director
James Desmond Collins-Taylor
Non Executive Director
Ian Wargent Ross
Non Executive Director
Karl-Axel Waplan
Non Executive Director
Kjell Emil Larsson
Non Executive Director
Company Secretary
John Lemon
Registered office
Suite 1, Level 6
200 Creek Street
Brisbane QLD 4000
AUSTRALIA
Postal address:
PO Box 728
Spring Hill QLD 4004
AUSTRALIA
Telephone: (07) 3833 3833
Facsimile: (07) 3833 3888
E-mail: [email protected]
Share registry
Link Market Services Limited
Level 12
300 Queen Street
Brisbane QLD 4000
AUSTRALIA
Postal Address:
GPO Box 2537
Brisbane QLD 4001
Telephone: (02) 8280 7454
Facsimile: (07) 3228 4999
Auditors
Pitcher Partners, Brisbane
Solicitors
Hopgood Ganim, Brisbane
Stock exchange listings
Union Resources Limited shares and options are quoted on:
(i) the Australian Stock Exchange as codes "UCL" ,"UCLOA" and "UCLOB" ;
and
(ii) the Alternative Investment Market of the London Stock Exchange ("AIM")
as codes "URL, "URLA" and "URLB".
Website address
www.unionresources.com.au
-1-
Union Resources Limited
Directors' report
Directors' report
The Directors present their report on the consolidated entity (referred to hereafter as "the Group") consisting of Union
Resources Limited (referred to hereafter as "the Company") and its controlled entities for the year ended 30 June 2006.
Directors
The names and details of the Directors of the Company in office during the year and until the date of this report are:
I J Burton (Chairman - Non Executive Director)
Experience and expertise
Mr Burton is the Chairman of the Board and has been a Director of Union Resources Limited since 1990. He has over 30
years experience in many facets of mining and business activities, during which time he has held many directorships of
public listed companies.
Other current directorships
MRI Holdings Limited (since 1990), Merchant House International Limited (since 1994), Ellendale Resources Limited (since
2001), and Tox Free Solutions Limited (since 2003)
Former directorships in last 3 years
Dioro Exploration NL (from 1990 to 2004) and Oriental Crystal (International) Limited (from 1996 to 2004)
Special responsibilities
Chairman of the Board, member of Audit Committee
Interests in shares and options
1,127,322 ordinary shares in Union Resources Limited
187,887 options over ordinary shares in Union Resources Limited
R B Murdoch B.A. (Earth Sciences), M.A.I.M.M., M.A.I.G. (Managing Director)
Experience and expertise
Mr Murdoch has been a Director of Union Resources Limited since 1992, and Managing Director for that period. He is a
geologist and has over 35 years of mining industry expertise and over 20 years of international business experience in the
management and financing of public companies.
Other current directorships
Gold Aura Limited (since 1995) and Jab Technologies Limited (since 1999)
Special responsibilities
Member of Project Steering Committee and Management Committee
Interests in shares and options
46,165,803 ordinary shares in Union Resources Limited
9,411,801 options over ordinary shares in Union Resources Limited
J D Collins-Taylor BA Bus ACA (Non Executive Director)
Experience and expertise
Mr Collins-Taylor has been a Director of Union Resources Limited since May 2005. He is a chartered accountant and was
formerly with Deloitte Touché Tohmatsu for 12 years. Mr Collins-Taylor has worked in the private equity and venture capital
fields in Asia since 1992. He has extensive corporate finance experience and has been involved in a number of major
transactions involving companies listed on the London and Hong Kong Stock Exchanges.
Other current directorships
Gold Aura Limited (since 2005)
Special responsibilities
Member of Audit Committee, Remuneration and Nomination Committee and Project Finance Committee
Interests in shares and options
NIL
-2-
Union Resources Limited
Directors' report
(continued)
Information on directors (continued)
I W Ross Dip Mgmt (Non Executive Director)
Experience and expertise
Mr Ross has been a Director of Union Resources Limited since June 2005. He has over forty years experience in
international business in Europe, USA, Asia and Australasia and has been at the leading edge of the development and
implementation of new financial techniques, particularly for companies in the resources industry. He qualified as, and is
currently, an Associate of the Chartered Institute of Bankers and holds a Diploma from the School of Management Studies,
Regent Street, London. Mr Ross has worked at the most senior level with many of the major Australian companies in
resolving sensitive, difficult problems and providing financial advice.
Other current directorships
Intec Limited (since 2003)
Special responsibilities
Member of Audit Committee, Remuneration and Nomination Committee, Project Finance Committee and Management
Committee
Interests in shares and options
1,507,032 ordinary shares in Union Resources Limited
507,032 options over ordinary shares in Union Resources Limited
K-A Waplan MSc.Mech Eng (Non Executive Director)
Experience and expertise
Mr Waplan has been a Director of Union Resources Limited since 12 September 2005. He is the President and CEO of
Lundin Mining Corp. Lundin Mining Corp is a Canadian mining and exploration company with a primary focus in Europe. Mr
Waplan has a Master of Science in Mechanical Engineering from the Royal Institute of Technology, Stockholm, Sweden.
He brings over 25 years professional and mining experience to the Board and has extensive international experience in
project financing, mine development, business negotiations and management of joint ventures.
Other current directorships
Lundin Mining AB, Lundin Mining Corp, Arcon Exploration plc, Arcon International Resources plc, Arcon Mines Limited,
Arcon Resources plc, Arcon Zinc Limited, NAN AB, North Mining Svenska AB, Zingruvan AB
Special responsibilities
Member of Remuneration and Nomination Committee, Project Finance Committee and Management Committee
Interests in shares and options
NIL
K E Larsson MSc. Min Eng (Non Executive Director)
Mr Larsson has been a Director of Union Resources Limited since 12 September 2005. He is a respected mining engineer
and has a Master of Science in Mining Engineering from Lulea University in Sweden. He has held senior management
positions for over 14 years including seven years international experience and six years direct engineering experience with
low-cost mining companies. He is currently employed as Vice President with Lundin Mining Corp.
Special responsibilities
Member of Project Steering Committee
Interests in shares and options
NIL
All Directors shown were in office for the entire year and up to the date of this report, unless otherwise stated.
Company secretary
Mr J A Lemon BA, LLB (Hons)
Mr Lemon was been Company Secretary of Union Resources Limited since 13 February 2006. He is a qualified solicitor
and has previously worked as an in-house lawyer for a number of large corporations, as well as having worked as Company
Secretary for several other listed public companies.
Mr Michael J. Ilett was Company Secretary from the beginning of the year up to his resignation on 13 February 2006.
Directors' meetings
The numbers of meetings of the Company’s board of directors and of each board committee held during the year ended 30
June 2006, and the numbers of meetings attended by each director were:
-3-
Union Resources Limited
Directors' report
(continued)
Directors' meetings (continued)
Board
Meetings of committees
Audit
Project
Finance
Remuneration
and
Nomination
Project
Steering
A
B
A
B
A
B
A
B
A
B
R B Murdoch
15
15
**
**
**
**
**
**
15
16
I J Burton
14
15
2
2
**
**
**
**
**
**
J D Collins-Taylor
12
15
2
2
7
7
9
9
**
**
I W Ross
15
15
**
**
7
7
9
9
**
**
K Waplan
12
14
**
**
7
7
9
9
**
**
K E Larsson
11
11
**
**
**
**
**
**
16
16
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during the year
** = Not a member of the relevant committee
Principal activities
During the year the principal continuing activity of the consolidated entity was carrying out an $8.8 million work programme
at the Mehdiabad Base Metal Project in Iran, which culminated in the production of a comprehensive Feasibility Study
Report in May 2006.
Review of operations
The operating loss from ordinary activities after income tax of the consolidated entity for the year ended 30 June
2006 was $2,382,471 (June 2005: loss $2,031,159 ).
A
Mehdiabad base metal project
Union Resources Limited ("Union") is focused on the development of the Mehdiabad Base Metal Project (the
"Project") in Iran through Mehdiabad Zinc Company ("MZC"). Union is the project manager, and has successfully
guided the Project through the exploration and feasibility stages, to a point where the project is ready to enter the
finance phase.
Whilst a small zinc deposit was previously known at Mehdiabad, Union's program of exploration outlined a world
class zinc, lead and silver deposit in 2000-1. A Pre-feasibility Study indicated that it may be viable to mine the
enlarged deposit by open-cut methods and process both zinc oxides ore and zinc sulphide concentrate by acid
leach technologies to produce SGH metal at the site and lead-silver concentrates for sale.
As a result further infill drilling, metallurgical testing and economic modeling were undertaken, and in November
2004 Union engaged Aker Kvaerner Australia Pty Ltd ("AKAU") to manage a Bankable Feasibility Development
Study ("BFDS") into commercial development of the Project.
Phases I and II of the BFDS were completed in March 2005. These first two phases essentially comprised a
comprehensive review of past work and an upgrade of the original pre-feasibility study, concluding with
recommendations on how to advance the BFDS to a final bankable document.
During the year in review Union implemented the AKAU-recommended BFDS Phase III program at a total cost of
around $A9.3 million. The work culminated in a 14 volume Feasibility Study Report (FS), completed by AKAU in
May 2006, and presented to the Company's Iranian partners in MZC for their review in June 2006.
-4-
Union Resources Limited
Directors' report
(continued)
Principal activities (continued)
The main activities undertaken as part of the Phase III of the BFDS during the year were:
· DRILLING: Completion of the drilling program, sample preparation and assaying involving a total in excess of
52,000 metres of diamond drilling.
· GEOLOGICAL: Completion of the core logging, data base, wire framed block modeling and resource
estimation from the drilling. The resource is now in excess of 90% either Measured or Indicated as classified
under the JORC code.
· GEOTECHNICAL STUDIES: Drilling, geotechnical core logging, test pitting and computer modeling to
determine the pit and waste dump stability for input into the mine design.
· MINE DESIGN: A series of pit optimisation program on various mine production scenarios and the
development of a mining reserve classified under the JORC code as probable ore, comprising the upper 50%
of the total reserve.
· OXIDE ORE METALLURGICAL TESTING: Evaluation of bulk samples from the oxide deposit through the
Technicas Reundas Pilot Plant, plus variability testwork of 300 samples to characterise each part of the oxide
deposit in terms of zinc extraction and acid consumption.
· SULPHIDE ORE METALLURGICAL TESTING: Evaluation of bulk samples for floatation concentrator design,
acid leaching of the bulk concentrate, plus evaluation of the variability of the floatation performance throughout
the sulphide portion of the resource, from numerous samples.
· ENVIROMENTAL: Completion of base line studies at the mine site and selection of an alternate plant located
24 kms from the mine that complies with the requirements of the Equator Principles for World Bank
acceptability.
· FLOW SHEET DESIGN: Development of the integrated plant to treat oxide and sulphide feed in an efficient
and cost effective way, plus completion of Metsim models for all the cases being run for the financial analysis
of the Project.
· PLANT DESIGN: Plant design for 200,000 tonne per annum zinc metal plant, with capital operating costs.
· ECONOMIC STUDIES: Consideration of the above scenario and comparison with other options to select the
economically optimised annual zinc production.
· COST ESTIMATIONS: Determination of capital and operating cost of each of the various scenarios tested in
the economic studies.
· BFDS PHASE III REPORT (FS Report): The preparation and completion of a 14 volume FS report, bringing
together the results of the above work program.
-5-
Union Resources Limited
Directors' report
(continued)
Principal activities (continued)
B
Gold Aura Limited in specie share distribution
Gold Aura Limited is a gold exploration company listed on the Australian Stock Exchange ("ASX") since
November 2002. On 13 September 2005 the Company completed an in specie share distribution of 10,142,764
Gold Aura Limited shares to eligible Union Resources Limited shareholders. As a result the company held 1.2%
of Gold Aura's issued shares, and Gold Aura Limited and its subsidiary company ceased to be part of the Union
Resources Limited Group of companies.
C
AIM listing
In October 2005 the Company's shares and ASX-listed options were also admitted to trading on the Alternative
Investment Market of the London Stock Exchange ("AIM"). The decision was taken to have the Company's
securities quoted on AIM to facilitate new opportunities in fund raisings and investment marketing as well as
provide additional liquidity to the Company's existing UK-based shareholders.
D
Sale of ETPI interest
In March 2006 the Company completed the sale of its indirect interest in Filipino telecommunications company
Eastern Telecommunications Philippines Inc. The Company's proceeds from the sale, after deduction of all
expenses, were US$3,980,114 and the Company may become entitled to a further US$274,000 upon receipt of
all tax clearances.
Dividends - Union Resources Limited
No dividends of the parent entity or any entity of the economic entity have been paid or declared or recommended since the
end of the preceding year. The Directors do not recommend the payment of any dividend for the year ended 30 June 2006.
-6-
Union Resources Limited
Directors' report
(continued)
Significant changes in the state of affairs
Significant changes in the state of affairs of the economic entity during the financial year were as follows:
$
(a)
An increase in contributed equity of $8,437,801 as a result of:
Placement of 7,000,000 fully paid ordinary shares @ 3.00 cents each (21 July 2005)
210,000
Placement of 76,000,000 fully paid ordinary shares @ 3.00 cents each (21 July 2005)
2,280,000
Conversion of 10,000 options to fully paid ordinary shares @ 10 cents per options (2 September
2005)
1,000
Rights issue of 101,430,711 fully paid ordinary shares @3.00 cents each (14 September 2005)
3,042,921
Placement of 75,000,000 fully paid ordinary shares @ 3.00 cents each (13 October 2005)
2,250,000
Placement of 17,417,461 fully paid ordinary shares @ 6.30 cents each (24 March 2006)
1,097,300
Placement 160,000 fully paid ordinary shares @ 6.30 cents each (17 May 2006)
10,080
8,891,301
Less:
Transaction costs arising on share issues, net of current income tax
(453,500)
Net increase in share capital
8,437,801
(b)
Net cash received from the increase in contributed equity amounting to $5,382,000 was used
principally to advance the Mehdiabad Project Bankable Feasibility Study and for working capital.
(c)
The sale of Union Resources Limited's indirect interest in Filipino telecommunications company
Eastern Telecommunications Philippines Inc in March 2006 realised a net sum of
US$3,980,114.
-
(d)
The Company completed an in specie share distribution of its Gold Aura Limited shares to
Union Resource Limited shareholders which resulted in Gold Aura Limited and its subsidiary
company ceasing to be a member of the consolidated economic entity.
Significant events after the balance date
On 24 August 2006 the Company issued:
10,000 options exercisable at 10 cents per option on or before 31 March 2009 to Societe Generale as consideration for the
provision of financial advisory services in connection with the Mehdiabad Project; and
90,000,000 options exercisable at 10 cents per option on or before 31 March 2009 to RAB Special Situations (Master) Fund
Limited.
Likely developments in the entity's operations
The Mehdiabad Project ("the Project") is operated through an Iranian joint venture company, Mehdiabad Zinc Company
(MZC). The founding shareholders of MZC at the formation of the company in 2003 were Union (25%), Itok GmbH (25%)
and the Government of Iran (50%). Under the joint venture agreements the Government was given a US$10 million credit
as a "loan convertible to equity" in the accounts of MZC. Union and Itok were required to spend a matching US$10 million
on the Project (called the "Earn in").
Whilst the Earn in has been completed (with total expenditure in excess of US$14 million) only a total of US$7.7 million of
that expenditure has been approved by MZC as a loan converting to equity at this time.
Upon the conversion of the past expenditure into shares Union expects its shareholding in MZC to increase to a percentage
in excess of 40%.
The review by Union's MZC partners of the Bankable Feasibility Development Study Report ("BFDS") is likely to be
completed shortly, following which decisions can be made on outstanding issues that are now delaying the Project, and on
the level of future investment by each partner in the Project.
-7-
Union Resources Limited
Directors' report
(continued)
Likely developments in the entity's operations (continued)
The outstanding issues are:
(a)
Formalise the completion of the Earn in, by converting past expenditure into shares in accordance with the
agreements between the parties;
(b)
Determine the financial contributions each shareholder will commit to, and hence the final ownership structure,
going forward;
(c)
The future board representation and management control of MZC;
(d)
The issue of the Exploitation License and other licenses required by MZC to operate the project; and
(e)
The forward development work programme and timetable.
Resolution of the above issues may result in the partners entering into a new Development Agreement, designed to fast
track the Project.
A preliminary review of the FS has been undertaken by Union's financial advisors Societe Generale who advise that:
"The Mehdiabad Project is at a crucial stage in its development. Enough work has been completed to give a reasonably
clear picture of the optimum project. The work that remains to be completed to take it to full Bankable Feasibility Study
(BFS) standard is unlikely to change the broad outline or result in the Project being considered uneconomic. The question
has, therefore to be addressed as to whether it is financeable and whether it is sufficiently certain to justify the remaining
expenditure on the BFS."
Once the outstanding MZC issues have been resolved the Project's finance phase can commence. The aim of the finance
phase will be to prepare all the necessary documentation required to attract the appropriate level of equity and debt finance
for the project. The finance phase is likely to cost around US$10 million and include the Phase IV BFDS Report or Funding
Document, a Financial Plan, and the determination of the Project's financeability. The finance phase is expected to take
around 12 months.
Environmental regulation and performance
The Company is applying sound environmental practice with respect to the Company's management of exploration being
carried out at the Mehdiabad Base Metal Project in Iran. As part of the proposed future development of this project, the
Mehdiabad Zinc Company (MZC) will be subject to environmental regulations by the Ministry of the Environment in Iran.
The company complies with the Mineral Resources Act (1989) and Environmental Protection Act (1994). The consolidated
entity is subject to environmental regulation in respect to its former mining activities in North Queensland by the
Environmental Protection Agency of Queensland. The maximum extent of that liability as assessed and regulated by the
Environmental Protection Authority of Queensland is $45,260.
Shares under option
Unissued ordinary shares of Union Resources Limited under option at the date of this report are as follows:
Expiry date
Issue price of
shares
Number of shares
under option
31 March 2009
9.82 cents
246,040,340
31 March 2009
10.00 cents
264,430,711
31 March 2009
7.50 cents
90,000,000
Option holders do not have any rights under the options to participate in any share issue of the company.
Shares issued on the exercise of options
10,000 ordinary shares of Union Resources Limited were issued during the year ended 30 June 2006 as a result of options
over unissued shares in the Company. No further shares have been issued since that date.
No options were issued to directors, officers or employees during the year as part of their remuneration.
Indemnification and insurance of directors
During the year Union Resources Limited paid a premium of $47,266 to insure the Directors and officers of the Company in
relation to all liabilities and expenses arising as a result of the performance of their duties in their respective capacities to
the extent permitted by law. The insurance period covered is from 24 December 2005 to 23 December 2006.
Non-audit services
During the financial year Union Resources Limited paid the following amounts to the Consolidated Entity's auditor. Pitcher
Partner, for non-audit services provided:
-8-
Union Resources Limited
Directors' report
(continued)
Audit services (continued)
Consolidated
2006
2005
$
$
Tax compliance services, including review of company income tax returns
39,510
22,346
AIM listing
23,530
-
Total remuneration for non audit services
63,040
22,346
The Directors of Union Resources Limited have considered the position and is in accordance with the advice received from
the Company's Audit Committee, are satisfied that the non-audit services are compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit
services by Pitcher Partners did not compromise the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
· all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
· none of the services undermine the general principles relating to auditor independence as set out in Professional
Statement F1, including reviewing or auditing the auditor's own work, acting in a management of a decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.
Audit Committee
The Audit Committee oversees and appraises the quality of audits conducted by the entity's external auditors, as well as
determining the adequacy of administrative, operating and accounting controls. It is responsible for ensuring that the entity
properly complies with all legislation and policies affecting its daily operations. It maintains open lines of communication
between the Board and external advisers and oversees the identification of risk to ensure its proper management. During
the year the Company held two Audit Committee meetings.
Members of the Audit Committee during the year were:
Name and position
I J Burton - Non Executive Chairman
J D Collins-Taylor - Non Executive Director
I W Ross - Non Executive Director
Remuneration report
The remuneration report is set out under the following main headings:
A
Principles used to determine the nature and amount of remuneration (audited)
B
Details of remuneration (audited)
C
Service agreements (audited)
D
Share-based compensation (audited)
-9-
Union Resources Limited
Directors' report
(continued)
Remuneration report (continued)
A
Principles used to determine the nature and amount of remuneration (audited)
The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors, Chief
Executive Officer and the senior executives. The Board also reviews and ratifies the Chief Executive Officer's
recommendations on the remuneration of key management and staff.
Executive Remuneration
The remuneration policy ensures that contracts for services are reviewed on a regular basis and properly reflect the duties
and responsibilities of the individuals concerned. The executive remuneration structure is based on a number of factors
including length of service, relevant market conditions, knowledge and experience with the industry, organisational
experience, performance of the Company and that the remuneration is competitive in retaining and attracting motivated
people. There are no guaranteed pay increases included in the senior executives' contracts.
Currently the executive remuneration comprises of a total fixed remuneration and does not comprise of any short-term
incentive schemes or equity based remuneration except as stated in section D below.
The Directors are not entitled to any retirement benefits except those as provided by the superannuation guarantee
legislation.
Non Executive Directors
The Board, within the maximum approved by the Shareholders, from time to time determines remuneration of Non
Executive Directors. The current maximum amount of Non Executive Directors' fees payable is fixed at $140,000 per
annum in total for a 12-month period. This amount was approved at the general meeting of shareholders held on 31 August
2005.
Directors' Fees
Remuneration for Non Executive Directors and Chairman is $35,000 per annum. The Non Executive Directors do not
currently participate in any cash bonus or share plans. Except for retirement benefits provided by the superannuation
guarantee legislation there are no retirement benefits for the Non Executive Directors.
B
Details of remuneration (audited)
Details of the nature and amount of each element of the emolument of each Director of the company and each of the six
executive officers of the company and the consolidated entity receiving the highest emolument for the year are set out in the
following tables. The company paid out no short-term incentives and granted no options to Directors or employees during
the financial period.
-10-
Union Resources Limited
Directors' report
(continued)
Remuneration report (continued)
B
Details of remuneration (audited) (continued)
Directors remuneration*
Short-term
benefits
Post-employment
benefits
Share-based
payment
2006
Cash
salary and
fees
Superannuation
Equity shares
Total
$
$
$
$
Chairman
I J Burton
32,105
2,916 -
-
35,021
Managing Director
R B Murdoch
252,100
252,100
R B Murdoch - Gold Aura Limited
7,088
- -
-
7,088
Non Executive Directors - Current**
J D Collins-Taylor
35,000
- -
-
35,000
I W Ross
48,108
2,890 -
-
50,998
K-A Waplan
27,708
- -
-
27,708
K E Larsson
20,417
- -
-
20,417
Total Directors June 2006
422,526
5,806 -
-
428,332
2005
Chairman
-
I J Burton
30,000
- -
-
30,000
Managing Director
R B Murdoch - Union
199,350
- -
-
199,350
R B Murdoch - Gold Aura Limited
75,750
- -
-
75,750
Non Executive Directors - Current*
J D Collins-Taylor
2,916
- -
-
2,916
Non Executive Directors - Non Current*
P R Sauerberg
7,023
- -
-
7,023
R C Hutton
207,999
- -
-
207,999
H M Moser
-
- 12,000
-
12,000
J Walker
-
- 12,000
-
12,000
Total Directors June 2005
523,038
- 24,000
-
547,038
* The Directors' and Executives' remuneration have been determined on the basis of the cost to the entity which includes
specific benefits and GST.
** K-A Waplan and K Larsson were appointed Directors on 12 September 2005 and 24 November 2005 respectively.
.
-11-
Union Resources Limited
Directors' report
(continued)
Remuneration report (continued)
B
Details of remuneration (audited) (continued)
Amounts of remuneration (continued)
Other key management personnel remuneration
Short-term
employee
benefits
Postemployment
benefits
Share-based
payment
2006
Cash
salary and
fees
Superannuation
Equity
Shares
Total
$
$
$
$
Company Secretary
J Lemon
53,330
-
-
53,330
CFO
-
-
-
-
C Estwick
39,593
3,563
-
43,156
Other key management personnel
-
-
-
-
M J Ilett
46,505
-
-
46,505
K G Chapple
29,615
2,665
-
32,280
P Scott
129,546
-
-
129,546
L Engstrom
169,825
-
-
169,825
Total Other key management personnel 2006
468,414
6,228
-
474,642
2005
Other key management personnel
-
-
-
-
K G Chapple
140,000
12,600
-
152,600
M J Ilett
90,133
-
-
90,133
R C Hutton
48,578
-
-
48,578
K Dawson
89,397
-
-
89,397
R Kamberaj
25,321
2,279
-
27,600
Total Other key management personnel 2005
393,429
14,879
-
408,308
-12-
Union Resources Limited
Directors' report
(continued)
Remuneration report (continued)
C
Service agreements (audited)
Remuneration and other terms of employment for the Chief Executive Officer and other key managment personnel are
formalised in service agreements. The contractual arrangements contain certain provisions typically found in contracts of
this nature. Other major provisions of the agreements relating to the remuneration are set out below:
R B Murdoch (Chief Executive Officer)
·
Base Salary of $125 per hour capped at $1,000 per day, plus travel, accommodation and general out of pocket
expenses
·
Period of Notice - Three (3) Months
·
Mr Murdoch ("RM") and Murdoch Geophysical Research Pty Ltd ("GR") (a company controlled by RM) entered into a
written agreement in 2002 under which the Company agreed to pay GR the sum of $200,000 per annum plus $150
per hour for services in excess of 50 hours per week, and to reimburse travel, accommodation and general out of
pocket expenses, for services provided by GR to the Company, including the provision of RM's services as
Managing Director of the Company ("the Agreement"). The Agreement expired on 30 June 2004, but continues to
operate in accordance with its terms, except for:
1. the provision limiting the term of the Agreement to two years; and
2. that the Company pays GR at the rate of $125 per hour, capped at $1,000 per day, for services provided under
the Agreement, as well as reimbursing travel, accommodation and general out of pocket expenses.
The Agreement provides that in the event that GR ceases to provide services under the Agreement, other than as a
consequence of certain defined events, the Company will pay to GR a sum by way of compensation for loss of
entitlements under the Agreement calculated as follows:
Compensation Payable = (Total Remuneration x Relevant Period (no. of years)) / 3
(i) "Total Remuneration" means the annual average of aggregate remuneration paid in the last 3 years
(ii) "Relevant Period" is capped at a maximum of 7 years.
Under the Agreement the Company's liability to compensate GR as at 30 June 2006 had GR ceased to provide
services under the Agreement as at that date would have been $266,862.
M J Ilett (Consultant Accountant)
·
Base Salary of $85 per hour inclusive of GST
·
Period of Notice - Four (4) Weeks
J A Lemon (Company Secretary)
·
Base Salary of $85 per hour plus GST for Company Secretarial services and $125 per hour plus GST for legal
services
·
Base Salary of $840 per day plus travel, accommodation and general out of pocket expenses
·
Period of Notice - Four (4) weeks
C C Estwick (Chief Financial Officer)
·
Base salary of $125.00 per hour inclusive of superannuation
·
Period of Notice - Four (4) weeks
D
Share-based compensation (audited)
No equity-based compensation was paid during the financial year.
Directors' interests in contracts
No material contracts involving Directors' interests were entered into during or at the end of the year, other than those
transactions detailed in note 27 of the Financial Report.
-13-
Union Resources Limited
Directors' report
(continued)
Auditors’ independence declaration
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 15.
Rounding of amounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ''rounding off'' of amounts in the directors' report. Amounts in the directors' report have not
been rounded off in accordance with that Class Order to the nearest thousand dollars, but to the nearest dollar.
Corporate governance
The Board of Directors is responsible for the Corporate Governance of the consolidated entity. The Board is committed to
achieving the highest standards of corporate behaviour and accountability. The Company's corporate governance
statement is contained in the following section of this report.
Signed for and on behalf of the Board in accordance with a resolution of the Directors
Director - R B Murdoch
Brisbane, 29 September 2006
-14-
Auditor’s Independence Declaration
to the Directors of Union Resources Limited
As lead auditor for the audit of Union Resources Limited for the year ended 30 June 2006, I declare that,
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Union Resources Limited and the entities it controlled during the period.
PITCHER PARTNERS
R J St Clair
Partner
Brisbane, 29 September 2006
Union Resources Limited
Corporate governance statement
Corporate governance statement
This statement outlines the main corporate governance practices in place and the extent to which the Company has
followed the recommendations of the ASX Corporate Governance Council ("ASX Council") throughout the year as
contained in the ASX Council's "Principles of Good Corporate Governance and Best Practice Recommendations".
Departures from the ASX Council best practice recommendations have been identified and explained below.
Principle 1 - Lay solid foundations for management and oversight
The Board has formalised the functions reserved to the Board and those delegated to Management in the "Board Charter"
previously adopted by the Board. A copy of the Board Charter appears on the Company's website. The Board is
responsible to shareholders for the Company's overall Corporate Governance. The Board delegates to the Chief Executive
Officer and the executive team the responsibility for the operation and administration of the Company. The Board ensures
that this team is appropriate qualified and experienced to discharge their responsibilities, and has in place procedures to
assess performance.
The responsibilities of the Board include:
· establish, monitor and modify the corporate, business and tactical level strategies of the Company;
· ensure compliance with good corporate governance and other requirements of the law;
· monitor the performance of the Company and its management;
· undertake a review of risks and further develop systems of internal control;
· ensure proper disclosure to shareholders and other stakeholders.
Principle 2 - Structure the Board to add value
The current Board of six members comprises of five Non Executive Directors and one Executive Director. The names, skills
and experience of the Directors in office at the date of this statement and the period of office of each Director are set out in
the Directors' Report.
The Board's Chairman (Mr I Burton) is a non-executive director. It is open to interpretation as to whether Mr Burton has
served on the Board for a period which could, or could reasonably be perceived to, materially interfere with his ability to act
in the best interests of the Company (as per the ASX Best Practice Recommendations), however it is considered that
notwithstanding this, the Chairman has provided stability to the Board and acts in the best interests of the Company.
The composition of the Board will be monitored to ensure that additional independent Directors are appointed on a timely
basis to fulfill specific skill sets needed by the Board to discharge its responsibilities competently and to meet its obligations.
Separate individuals exercise the roles of the Chairperson and Chief Executive Officer.
The Board constituted the Remuneration & Nomination Committee ("R&N Committee") as a committee of the Board on 28
November 2005 and has adopted a written charter for the R&N Committee. A copy of the charter can be found on the
Company's website.
The R&N Committee consists of at least 3 non-executive directors. The Chair of the Board may not chair the R&N
Committee.
The R&N Committee's duties include evaluating and recommending to the Board:
· Board membership criteria;
· Candidates for Board membership and the position of Managing Director;
· Board composition; and
· Appraisal of performance of Board members and executives.
Principle 3 - Promote ethical and responsible decision making
The Company is firmly committed to ethical business practices, a safe workplace and compliance with the law. Fair dealing
with the Company’s suppliers, advisors, customers, employees and competitors is expected at all levels of the organisation.
All Directors, executive management and employees are expected to act with integrity to enhance the performance of the
Company. The Company has established a Code of Conduct which provides a guide to the Directors and employees as to
the practices necessary to maintain confidence in the Company’s integrity and ethical practices. The Code of Conduct is
contained in the Corporate Governance Policy, which appears on the Company’s website.
The Board has established written guidelines set out in its Corporate Ethics and Securities Trading Policy for trading in the
Company’s shares by the Company's directors. The policy restricts the buying or selling of Company Shares within seven
days prior to the release of the half year and annual reports and at any time during which the Directors are aware of
unpublished price sensitive information.
-16-
Union Resources Limited
Corporate governance statement
(continued)
The Corporate Ethics and Securities Trading Policy has been published on the Company’s website.
Principle 4 - Safeguard integrity in financial reporting
The Board requires that prior to adoption of the annual accounts, the Chief Executive Officer and Chief Financial Officer
state in writing to the Board that the consolidated financial statements of the Company and its controlled entities present a
true and fair view in all material respects of the Group’s financial condition and operational results and are in accordance
with applicable accounting standards.
The Board established an Audit Committee which operates under a Charter approved by the Board. It is the Audit
Committee’s responsibility to ensure that an effective internal control framework exists within the Company. This includes
internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of
assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial
considerations such as the benchmarking of operational key performance indicators.
A copy of the Audit Committee Charter has been published on the Company's website.
The current audit committee comprises of three non-executive directors, at least the majority of whom are independent
directors. The Chairman of the Audit Committee is an independent, non-executive director who is not Chairman of the
Board.
Meetings of the Committee may be attended by invitation by the Managing Director, Chief Financial Officer, the
engagement partner from the Company's external auditors and any such other senior staff or professional people as may
be appropriate from time to time. The Company ensured that at least one person present had financial experience and that
at lease one member had an understanding of the resources sector.
During the period the Audit Committee met with the external auditor to review the independence of the external auditor and
discuss the need for rotation of external audit engagement partners. The Audit Committee determined that was no need for
any change in the external auditor.
Principle 5 - Make timely and balanced disclosure
The Company has established policies and procedures designed to ensure compliance with the ASX Listing Rule
requirements so that announcements are made in a timely manner, are factual, do not omit material information, are
balanced and are expressed in a clear and objective manner so as to allow investors to assess the information when
making investment decisions. The Chief Executive Officer and Company Secretary are responsible for interpreting and
monitoring the Company's disclosure policy and the Company Secretary is responsible for all communications with the
ASX.
ASX announcements are also published on the Company's website. The Company's Corporate Governance Policy contains
procedures relating to timely and balanced disclosure. A copy of this policy has been published on the Company's website.
Principle 6 - Respect the rights of shareholders
The Company aims to keep shareholders informed of the Company's performance and all major developments in an
ongoing manner.
The Company regularly communicates to its shareholders in a timely manner through a communications strategy that
consists of:
· relevant disclosures made in accordance with ASX Listing Rule disclosure requirements;
· making documents that have been released publicly available on the Company's website; and
· communicating with shareholders electronically through the Company's web-based application.
The Company’s website contains a corporate governance section that includes copies of policies, procedures and charters.
The Company routinely requests that the external auditor attend the Company's annual general meeting and be available to
answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
-17-
Union Resources Limited
Corporate governance statement
(continued)
Principle 7 - Recognise and manage risk
Oversight of the risk management function
Union Resources recognises that it is necessary to undertake activities that involve a level of risk in order to achieve high
levels of performance. The Board and Audit Committee are responsible for the oversight of the Group’s risk management
and control framework.
The size of the Company and the comprehensive nature of its reporting systems have led the Board to conclude that a
formal internal audit process would not be cost effective nor reduce risk. There is no formal Risk Management Policy,
however the Company is focused on the identification and management of risk including:
· establishing the Company's corporate level and business level goals and monitoring and implementing strategies to
achieve these goals;
· identifying and measuring risks that might impact upon the achievement of the Company's goals and monitor for trends
and emergent factors;
· reviewing the year-end reports and other reports required to be lodged with the ASX.
The Board believes that there are adequate controls to ensure that financial reports provide a truthful and factual position
for the Company.
Certification of risk management controls
The Chief Executive Officer and Chief Financial Officer are each required to make an annual written statement to the Board
with respect to risk management and internal controls.
Principle 8 - Encourage enhanced performance
The Board undertakes an annual review of its performance and the performance of key executives. Directors were initially
invited to join the Board on the basis of their experience and skills in relation to the Company’s activities.
The performance criteria against which Directors’ and executives are assessed in line with the Company’s objectives. The
Board has a responsibility to ensure that executive remuneration is fair and reasonable, having regard to the competitive
market for executive talent, structured effectively to motivate and retain valued executives, and designed to produce value
for shareholders.
Principle 9 - Remunerate fairly and responsibly
The Company's Board of Directors constituted the Remuneration and Nomination Committee ("R&N Committee") as a
committee of the Board on 28 November 2005. The R&N Committee has responsibility, inter alia, for making
recommendations to the Board on appropriate remuneration, both in terms of quantum and composition, for directors and
executives.
The R&N Committee consists of three non-executive directors. The chair of the Company's Board must not be the Chair of
the Committee.
The R&N Committee has adopted a written charter which is published on the Company's website.
It is the objective of Union Resources Limited to provide maximum stakeholder benefit from the retention of a high quality
Board and executive team by remunerating Directors’ and key executives fairly and appropriately with reference to relevant
employment market conditions.
Non-executive Directors are entitled to Director's Fees. Non-executive Directors are not entitled to any retiring allowance
payable upon their retirement as a Director of the Company. The details of the Directors’ and Senior Executives’
remuneration are set out in the Directors’ Report and the Financial Report in note 27.
Principle 10 - Recognise the legitimate interests of stakeholders
The Company recognises its legal and other obligations including its responsibility to act in good faith and with integrity
whilst dealings with Company affairs. These responsibilities relate to all stakeholders including clients, customers,
suppliers, government, financial institutions, shareholders and to the community as a whole.
The Company is firmly committed to ethical business practices, a safe workplace and compliance with the law. These
include trade practices and fair dealing laws, consumer protection, privacy, employment, occupational health and safety,
equal employment opportunity, superannuation and environmental laws.
As indicated under Principle 3, the Company has established a Code of Conduct to guide compliance with legal and other
obligations to the legitimate stakeholders of the Company.
-18-
Contents
Page
Financial report
Income statements
20
Balance sheets
21
Statements of changes in equity
22
Cash flow statements
23
Notes to the financial statements
24
Directors' declaration
63
Audit report
64
Union Resources Limited
Income statements
For the year ended 30 June 2006
Consolidated
Parent
2006
2005
2006
2005
Notes
$
$
$
$
Revenue from continuing operations
4
227,863
1,540,513
227,863
1,069,144
Other income
5
1,245
(2,414)
-
-
Expenses, excluding finance costs
6
(1,457,260)
(2,343,022)
(1,719,157)
(2,712,101)
Finance costs
(2,286)
(1,854)
(2,029)
(1,812)
Profit/(Loss) before income tax
(1,230,438)
(806,777)
(1,493,323)
(1,644,769)
Income tax benefit
8
9,193
-
9,193
-
Profit/(Loss) from continuing operations
(1,221,245)
(806,777)
(1,484,130)
(1,644,769)
Profit/(Loss) from discontinued operations
18
(1,161,226)
(1,224,382)
(1,389,648)
-
Profit/(Loss) for the year
(2,382,471)
(2,031,159)
(2,873,778)
(1,644,769)
Profit/(Loss) attributable to minority interest
63,246
333,405
-
-
Profit/(Loss) attributable to members of
Union Resources Limited
(2,319,225)
(1,697,754)
(2,873,778)
(1,644,769)
Cents
Cents
Profit/(Loss) per share for profit from
continuing operations attributable to the
ordinary equity holders of the company:
Basic loss per share
9
(0.15)
(0.33)
Diluted loss per share
9
(0.15)
(0.33)
Cents
Cents
Profit/(Loss) per share for profit attributable
to the ordinary equity holders of the
company:
Basic earnings per share
9
(0.30)
(0.46)
Diluted earnings per share
9
(0.30)
(0.46)
The above income statements should be read in conjunction with the accompanying notes.
-20-
Union Resources Limited
Balance sheets
As at 30 June 2006
Consolidated
Parent
2006
2005
2006
2005
Notes
$
$
$
$
ASSETS
Current assets
Cash and cash equivalents
11
5,337,971
1,896,569
5,293,947
1,726,379
Trade and other receivables
12
111,914
186,992
111,914
161,548
Total current assets
5,449,885
2,083,561
5,405,861
1,887,927
Non-current assets
Receivables
13
-
-
21,479,823
18,482,440
Available-for-sale financial assets
15
315,985
6,030,560
546,796
1,979,284
Property, plant and equipment
16
47,937
30,188
42,928
23,402
Other financial assets
14
65,260
211,026
65,260
45,260
Evaluation and exploration expenditure
17
20,930,191
15,111,175
-
-
Total non-current assets
21,359,373
21,382,949
22,134,807
20,530,386
Total assets
26,809,258
23,466,510
27,540,668
22,418,313
LIABILITIES
Current liabilities
Provisions
20
24,501
41,364
24,501
20,170
Trade and other payables
19
503,124
1,096,928
503,124
932,257
Total current liabilities
527,625
1,138,292
527,625
952,427
Non-current liabilities
Provisions
21
16,331
43,315
16,331
33,197
Payables
-
302,035
-
-
Total non-current liabilities
16,331
345,350
16,331
33,197
Total liabilities
543,956
1,483,642
543,956
985,624
Net assets
26,265,302
21,982,868
26,996,712
21,432,689
EQUITY
Contributed equity
22
88,857,141
80,419,340
88,857,141
80,419,340
Reserves
23(a)
821,159
1,191,429
821,159
821,159
Accumulated losses
23(b)
(63,412,998)
(61,202,493)
(62,681,588)
(59,807,810)
Minority interest
24
-
1,574,592
-
-
Total equity
26,265,302
21,982,868
26,996,712
21,432,689
The above balance sheets should be read in conjunction with the accompanying notes.
-21-
Union Resources Limited
Statements of changes in equity
For the year ended 30 June 2006
Consolidated
Parent
2006
2005
2006
2005
Notes
$
$
$
$
Total equity at the beginning of the financial
year
21,982,868
18,579,268
21,432,689
18,204,336
Profit/(Loss) for the year
(2,382,471)
(2,031,159)
(2,873,778)
(1,644,769)
Contributions of equity, net of transaction costs
22
8,437,801
6,124,398
8,437,801
6,124,398
Disposal of Gold Aura Limited changes in
Asset Revaulation Reserve
23
(370,270)
-
-
-
Total changes in minority interest
24
(1,402,626)
561,637
-
-
In specie share distribution of Jab Technology
Limited shares
-
(1,251,276)
-
(1,251,276)
6,664,905
5,434,759
8,437,801
4,873,122
Total equity at the end of the financial year
26,265,302
21,982,868
26,996,712
21,432,689
The above statements of changes in equity should be read in conjunction with the accompanying notes.
-22-
Union Resources Limited
Cash flow statements
For the year ended 30 June 2006
Consolidated
Parent
2006
2005
2006
2005
Notes
$
$
$
$
Cash flows from operating activities
Deposits received
-
11,000
-
-
Receipts from customers (inclusive of goods
and services tax)
-
350,632
19,494
300,920
Interest received
240,829
98,453
201,240
75,526
Interest and other financial costs paid
(2,286)
(3,672)
(2,029)
(1,812)
Payments to suppliers and employees
(inclusive of goods and services tax)
(1,487,859)
(1,195,631)
(1,217,766)
(1,010,280)
Net cash (outflow) inflow from operating
activities
31
(1,249,316)
(739,218)
(999,061)
(635,646)
Cash flows from investing activities
Payments for equity investments
(14,784)
(105,991)
(14,784)
(105,991)
Payments for property, plant and equipment
(45,517)
(33,196)
(45,485)
(25,234)
Purchase of exploration, evaluation and
development assets
(9,309,926)
(5,529,931)
-
(4,583)
Proceeds from refund of deposit
-
361
-
-
Loans repaid (granted) to subsidiary and
investee companies
-
-
(3,780,745)
(4,836,911)
Payments for security deposit
(20,000)
-
(20,000)
-
Proceeds from sale of discontinued operation
18
5,631,175
-
-
-
Net cash (outflow) inflow from investing
activities
(3,759,052)
(5,668,757)
(3,861,014)
(4,972,719)
Cash flows from financing activities
Proceeds from issue of ordinary shares and
options
8,891,301
6,968,911
8,891,301
6,336,925
Other - Share issue costs
(463,655)
(249,245)
(463,655)
(236,527)
Net cash inflow (outflow) from financing
activities
8,427,646
6,719,666
8,427,646
6,100,398
Net increase (decrease) in cash and cash
equivalents
3,419,278
311,691
3,567,571
492,033
Cash and cash equivalents at the beginning of
the financial year
1,896,566
1,584,875
1,726,379
1,234,346
Effects of exchange rate changes on cash and
cash equivalents
22,127
-
-
-
Cash and cash equivalents at end of year
11
5,337,971
1,896,566
5,293,950
1,726,379
The above cash flow statements should be read in conjunction with the accompanying notes.
-23-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate
financial statements for Union Resources Limited as an individual entity and the consolidated entity consisting of Union
Resources Limited and its subsidiaries.
(a)
Basis of preparation
This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial
Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent
Issues Group Interpretations and the Corporations Act 2001.
Statement of Compliance
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards. Compliance
with AIFRSs ensures that the consolidated financial statements and notes of Union Resources Limited comply with
International Financial Reporting Standards (IFRSs). The parent entity financial statements and notes also comply with
IFRS except that it has elected to apply the relief provided to parent entities in respect of certain disclosure requirements
contained in AASB 132 Financial Instruments: Presentation and Disclosure and AASB 124 Related Party Disclosures.
Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards
These financial statements are the first Union Resources Limited financial statements to be prepared in accordance with
AIFRS. AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been
applied in preparing these financial statements.
Financial statements of Union Resources Limited until 30 June 2005 had been prepared in accordance with previous
Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When
preparing Union Resources Limited 2006 financial statements, management has amended certain accounting, valuation
and consolidation methods applied in the AGAAP financial statements to comply with AIFRS. With the exception of
financial instruments, the comparative figures in respect of 2005 were restated to reflect these adjustments. The Group has
taken the exemption available under AASB 1 to only apply AASB 132 and AASB 139 from 1 July 2005.
Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRSs on the Group's equity and its
net income are given in note 32.
Early adoption of standard
The Group has elected to apply AASB 119 Employee Benefits (issued in December 2004) to the annual reporting period
beginning 1 July 2005. This includes applying AASB 119 to the comparatives in accordance with AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit
or loss, certain classes of property, plant and equipment and investment property.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 3.
External enviroment
In preparing the financial statements the Directors note that Union Resources Limited group of companies has the ability to
continue as a going concern so long as the economic entity is not materially affected by an adverse change in the external
enviroment in which it operates.
(b)
Principles of consolidation
(i)
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Union Resources Limited
(''company'' or ''parent entity'') as at 30 June 2006 and the results of all subsidiaries for the year then ended. Union
Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated
entity.
-24-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and
balance sheet respectively.
(ii)
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity
financial statements using the cost method and in the consolidated financial statements using the equity method of
accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share
of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent
entity’s income statement, while in the consolidated financial statements they reduce the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest
in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the
policies adopted by the Group.
(iii)
Joint ventures
Joint venture operations
The proportionate interests in the assets, liabilities and expenses of a joint venture operation have been incorporated in the
financial statements under the appropriate headings.
Joint venture entities
The interest in a joint venture partnership is accounted for in the consolidated financial statements using the equity method
and is carried at cost by the parent entity. Under the equity method, the share of the profits or losses of the partnership is
recognised in the income statement, and the share of movements in reserves is recognised in reserves in the balance
sheet.
Profits or losses on transactions establishing the joint venture partnership and transactions with the joint venture are
eliminated to the extent of the Group’s ownership interest until such time as they are realised by the joint venture
partnership on consumption or sale, unless they relate to an unrealised loss that provides evidence of the impairment of an
asset transferred.
(c)
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks
and returns that are different to those of other business segments. A geographical segment is engaged in providing
products or services within a particular economic environment and is subject to risks and returns that are different from
those of segments operating in other economic environments.
-25-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
(d)
Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Union Resources Limited’s functional and presentation currency.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment
hedges.
Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part
of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-forsale
financial assets, are included in the fair value reserve in equity.
(iii)
Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
·
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
·
income and expenses for each income statement are translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
·
all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity.
When a foreign operation is sold or borrowings repaid, a proportionate share of such exchange differences are recognised
in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the
foreign entities and translated at the closing rate.
(e)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances and duties and taxes paid.
(f)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements,
and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each
jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial
recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences
if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either
accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
-26-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in
equity.
Union Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation.
Tax consolidation legislation
Union Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation. Amounts receivable or payable under an accounting tax sharing agreement with the tax consolidated entities are
recognised separately as tax-related amounts receivable or payable. Expenses and revenues arising under the tax sharing
agreement are recognised as a component of income tax expense (revenue).
(g)
Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are
classified as finance leases (note 16). Finance leases are capitalised at the lease’s inception at the lower of the fair value
of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of
finance charges, are included in other long term payables. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance
cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases (note 25). Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis over the period of the lease.
(h)
Acquisition of Assets
The purchase method of accounting is used for all acquisitions of assets (including business combinations) regardless of
whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares
issues or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.
Where equity instruments are issued in acquisition, the value of the instruments is their market price as at acquisition date,
unless the notional price at which they could be placed in the market is a better indicator of fair value.
Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost
of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the
cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised
directly in the income statement, but only after a reassessment of the identification and measurement of the net assets
acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
(i)
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating units).
-27-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
(j)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
(k)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
doubtful debts. Trade receivables are due for settlement no more than 120 days from the date of recognition for land
development and resale debtors, and no more than 30 days for other debtors.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of receivables. The amount of the provision is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective
interest rate. The amount of the provision is recognised in the income statement.
(l)
Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount and
fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than
through continuing use.
An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal
group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised
by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for
sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance sheet.
(m)
Investments and other financial assets
From 1 July 2004 to 30 June 2005
The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 only from 1 July 2005. The
Group has applied previous AGAAP to the comparative information on financial instruments within the scope of AASB 132
and AASB 139.
For further information on previous AGAAP refer to the annual report for the year ended 30 June 2005.
Adjustments on transition date: 1 July 2005
The nature of the main adjustments to make this information comply with AASB 132 and AASB 139 is that, with the
exception of held-to-maturity investments and loans and receivables which are measured at amortised cost (refer below),
fair value is the measurement basis. Fair value is inclusive of transaction costs. Changes in fair value are either taken to
the income statement or an equity reserve (refer below). At the date of transition (1 July 2005) changes to carrying
amounts are taken to retained earnings or reserves.
For further information concerning the adjustments on transition date reference should be made to the following notes:
·
Available-for-sale financial assets - note 15
·
Other financial assets - note 14
·
Reserves and retained profits - note 23
-28-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
·
Explanation of transition to AIFRSs - note 32: section 5 of this note discloses the adjustment to each line item in the
financial statements on transition date.
From 1 July 2005
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the
purpose for which the investments were acquired. Management determines the classification of its investments at initial
recognition and re-evaluates this designation at each reporting date.
(i)
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or
loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in
the short term or if so designated by management. The policy of management is to designate a financial asset if there
exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. Derivatives
are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as
current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date.
(ii)
Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of
selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the
balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the
balance sheet (notes 12 and 13).
(iii)
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities
that the Group’s management has the positive intention and ability to hold to maturity.
(iv)
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either
designated in this category or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the balance sheet date.
Purchases and sales of investments are recognised on trade-date - the date on which the Group commits to purchase or
sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at
fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of
ownership.
Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair
value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest
method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair
value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised
gains and losses arising from changes in the fair value of non monetary securities classified as available-for-sale are
recognised in equity in the available-for-sale investments revaluation reserve. When securities classified as available-forsale
are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses
from investment securities.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and
for unlisted securities), the Group establishes fair value by using valuation techniques. These include reference to the fair
values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the
same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial
assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the
fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost
and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss - is
removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on
equity instruments are not reversed through the income statement.
-29-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
(n)
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for
financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the
current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on
market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for
long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair
value for the remaining financial instruments. The fair value of interest-rate swaps is calculated as the present value of the
estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market
rates at the balance sheet date.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the Group for similar financial instruments.
(o)
Property, plant and equipment
Land and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent
valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated
against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All
other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on
qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in
which they are incurred.
Increases in the carrying amounts arising on revaluation of land and buildings are credited to other reserves in
shareholders' equity. To the extent that the increase reverses a decrease previously recognised in profit or loss, the
increase is first recognised in profit and loss. Decreases that reverse previous increases of the same asset are first
charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all
other decreases are charged to the income statement.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or
revalued amounts, net of their residual values, over their estimated useful lives, as follows:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
income statement. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in
respect of those assets to retained earnings.
(p)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
-30-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
(q)
Provisions
Provisions for legal claims and service warranties are recognised when: the Group has a present legal or constructive
obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
(r)
Employee benefits
(i)
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to
be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to
the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for nonaccumulating
sick leave are recognised when the leave is taken and measured at the rates paid or payable.
(ii)
Long service leave
The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the
provision for employee benefits and measured as the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
(iii)
Share-based payments
Share-based compensation benefits are provided to employees via the Union Resources Employee Option Plan and an
employee share scheme.
Shares options granted after 7 November 2002 and vested after 1 January 2005
The fair value of options granted under the Union Resources Employee Option Plan is recognised as an employee benefit
expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period
during which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable
nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability
and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that
are expected to become exercisable. The employee benefit expense recognised each period takes into account the most
recent estimate.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to
share capital.
The market value of shares issued to employees for no cash consideration under the employee share scheme is
recognised as an employee benefits expense with a corresponding increase in equity when the employees become entitled
to the shares.
(s)
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a
business are not included in the cost of the acquisition as part of the purchase consideration.
-31-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
1
Summary of significant accounting policies (continued)
(t)
Earnings per share
(i)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
(u)
Financial instrument transaction costs
The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005. The
Group has applied previous Australian GAAP (AGAAP) in the comparative information on financial instruments within the
scope of AASB 132 and AASB 139. Under previous AGAAP transaction costs were excluded from the amounts disclosed
in the financial statements. Under AIFRS such costs are included in the carrying amounts. At the date of transition to
AASB 132 and AASB 139 the adjustment to carrying amounts for the Group was immaterial.
(v)
Rounding of amounts
The company is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments
Commission, relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have not been
rounded off in accordance with that Class Order to the nearest thousand dollars, but to the nearest dollar.
(w)
Exploration, evaluation and development expenditure
Exploration, evaluation and development expenditure incurred is capitalised in respect of each identifiable area of interest.
These costs are only carried forward to the extent that they are expected to be recouped through the successful
development of the area or interest or when activities in the areas of interest have not yet reached a stage which permit
reasonable assessment of the existence of economically recoverable reserves.
The ultimate recoupment of capitalised costs is dependent on the successful development and commercial exploitation, or
sale, of the respective areas of interest. Accumulated costs in relation to an abandoned area are written off in full against
profit in the year in which the decision to abandon the area is made.
Where costs are capitalised on exploration, evaluation and development, they are amortised over the life of the area of
interest to which they relate once production has commenced. Amortisation charges are determined on a production output
basis, unless a time basis is more appropriate under specific circumstances.
(x)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
-32-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
2
Financial risk management
The Group's activities expose it to a variety of financial risks; market risk (including foreign currency risk, fair value interest
rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group's overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group.
Risk management is carried out under policies set by the Managing Director and approved by the Board of Directors. The
Board provides principles for overall risk management, as well as policies covering specific areas.
(a)
Market risk
(i)
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in
a currency that is not the entity's functional currency.
The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures to the US
Dollar and Iranian Rials.
As the Group is still in the exploration and evaluation stage it has not needed to use forward contracts to manage foreign
exchange risk. The Board will continue to monitor the Group's foreign currency exposures.
(ii)
Price risk
The Group is exposed to commodity price risk. As an exploration and evaluation company, the Group's capacity to raise
additional funds is dependent upon commodity prices.
(iii)
Fair value interest rate risk
Refer to (d) below.
(b)
Credit risk
The Group has no significant concentrations of credit risk.
(c)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate
amount of committed credit facilities and the ability of the Group to raise funds on the capital markets. The Managing
Director and the Board continue to monitor the Group's financial position to ensure that it has available funds to meet its
ongoing commitments.
(d)
Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are not materially
exposed to changes in market interest rates.
The Group does not have an interest-rate risk arising from long-term borrowings.
3
Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
(a)
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
-33-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
3
Critical accounting estimates and judgments (continued)
(i)
Exploration and Evaluation Expenditure
The exploration, evaluation and development expenditure is reviewed regularly to ensure that the capitalised expenditure is
only carried forward to the extent that its is expected to be recouped through the successful development of the areas of
interest or when activities in the areas of interest have not yet reached a stage which permit reasonable assessment of the
existence of economically recoverable reserves. The policy is outlined in note 1.
(ii)
Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is
required in determining the worldwide provision for income taxes and for planning purposes when entering into contracts.
There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax
determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. The Group currently has available tax losses. Once the Group is subject to company tax
liabilities it will record any tax differences in the current and deferred tax provisions in the period in which such
determination is made.
(b)
Critical judgments in applying the entity’s accounting policies
There were no critical judgments made in applying the Group's accounting policies.
4
Revenue
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Sales revenue
Sale of goods
-
313
-
-
Other revenue
Interest - unrelated parties
202,863
75,593
202,863
75,593
Debt forgiveness income
-
1,464,607
-
993,551
Administration Income
25,000
-
25,000
-
227,863
1,540,513
227,863
1,069,144
5
Other income
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Foreign exchange gains (net)
1,245
(2,414)
-
-
-34-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
6
Expenses
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Expenses, excluding finance costs, included in the
income statement classified by nature
Audit fees
57,205
27,500
57,205
27,500
Consulting fees
413,363
164,960
413,363
164,960
Directors' expenses
198,771
56,803
198,771
56,803
Depreciation and amortisation expense
10,106
22,334
25,319
41,924
Employee benefits expense
156,765
51,114
156,765
58,188
Insurance
89,302
49,782
89,302
49,782
Marketing and promotion expenses
30,064
25,884
29,584
24,464
Occupancy expenses
32,998
35,053
26,753
33,733
Share registry / meeting costs
158,282
78,200
158,282
78,200
Telephone
25,622
11,391
23,035
11,392
Travel
73,090
54,563
69,570
54,554
Diminution of asset values
6,984
1,627,905
241,640
2,046,803
General administration expenses
147,083
137,533
171,943
63,798
Impairment of Jab Technologies Limited shares
57,625
-
57,625
-
1,457,260
2,343,022
1,719,157
2,712,101
7
Dividends paid or provided for on ordinary shares
Parent
2006
2005
$
$
No dividends of the parent entity or any entity within the consolidated entity have been
declared or recommended since the end of the preceding year. The Directors do not
recommend the payment of any dividend for the year ended 30 June 2006.
-
-
-35-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
8
Income tax benefit
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
(a)
The components of income tax
expenses/(revenue)
Current tax
(9,193)
-
(9,193)
-
Total tax expense/(revenue)
(9,193)
-
(9,193)
-
(b)
The prima facie tax on profit/(loss) differs from
the income tax provided in the financial
statement as follows:
Profit/(Loss) from continuing operations before income
tax expense
(1,115,534)
(2,031,159)
(1,493,323)
(1,644,769)
Profit from discontinuing operations before income tax
expense
(1,276,129)
-
(1,389,648)
-
(2,391,663)
(2,031,159)
(2,882,971)
(1,644,769)
At the statutory income tax rate of 30% (2005 - 30%)
(717,499)
(609,348)
(864,891)
(493,431)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Non-deductible legal fees
-
(10,456)
-
4,457
Other
1,081
10,323
707
10,323
(716,418)
(609,481)
(864,184)
(478,651)
Net adjustment to deferred tax assets and liabilities
for tax losses and temporary differences not
recognised
716,418
609,481
864,184
478,651
Benefit of research and development tax offset
(9,193)
-
(9,193)
-
Total income tax expense/(revenue)
(9,193)
-
(9,193)
-
-36-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
8
Income tax benefit (continued)
(c)
Unregognised net deferred tax assets:
Unused tax losses for which no deferred tax asset has
been recognised
14,314,963
13,050,469
14,314,963
13,050,469
Unused capital losses for which no deferred tax asset
has been recognised
28,898,736
10,627,843
29,898,736
10,627,843
Temporary differences for which no deferred tax
asset/(liability) has been recognised:
-Property, plant and equipment
190
190
190
190
-Accrual
31,290
36,064
31,290
36,064
-Employee entitlement
40,832
53,367
40,832
53,367
-Capital raising costs
666,857
284,510
666,857
284,510
-Borrowing costs
7,485
22,309
7,485
22,309
-Interest receivable
(495)
(67)
(495)
(67)
-Shares held at fair value
(53,928)
(183,774)
(53,928)
1,428,774
-Convertible notes held at fair value
-
17,411,188
-
-
-Provision for write down of laon
964
964
964
964
-Unrealised foreign exchange gain
-
(29,354)
-
-
Potential tax benefit @ 30%
13,172,068
12,382,113
13,472,068
7,651,327
Unused tax losses which have not been recognised as
an asset, will only be obtained if:
(i) the economic entity derives future assessable income of a nature and of an amount suffiecient to enable the losses to be
realised;
(ii) the economic entity continues to comply with the conditions for deductibility imposed by the law; and
(iii) no changes in tax legislation adversly affect the economic entity in realising the losses.
(d)
Tax consolidation legislation
Union Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 July 2003. The Australian Taxation Office has been notified of the formation of the Union Resources
Limited tax consolidated group. note 1(f).
Where applicable, each entity in the group recognises its own current and deferred tax assets and liabilities, except for any
amounts resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current
tax liability of each group entity is then subsequently assumed by the parent entity. The wholly-owned entities have fully
compensated Union Resources Limited for deferred tax liabilities assumed by Union Resources Limited that have been
recognised in the accounts and have been fully commpensated for any deferred tax assets transferred to Union Resources
Limited that have been brought to account.
The entities have also entered into a tax sharing and funding agreement. Under the terms of this agreement, the whollyowned
entities fully reimburse Union Resources Limited for any current tax payable by Union Resources Limited arising in
respect of their activities. The reimbursements are payable at the same time as the associated income tax liability falls due.
As ther are significant income tax losses carried forward by the consolidated entity, no tax-related receivable/payable
amounts have been recognised by Union Resources Limited.
-37-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
9
Earnings/(Loss) per share
Consolidated
2006
2005
Cents
Cents
(a)
Basic loss per share
Profit/(Loss) from continuing operations attributable to the ordinary equity holders of the
company
(0.15)
(0.33)
Profit/(Loss) from discontinued operation
(0.15)
(0.13)
Profit/(Loss) attributable to the ordinary equity holders of the company
(0.30)
(0.46)
(b)
Diluted loss per share
Profit/(Loss) from continuing operations attributable to the ordinary equity holders of the
company
(0.15)
(0.33)
Profit/(Loss) from discontinued operation
(0.15)
(0.13)
Profit/(Loss) attributable to the ordinary equity holders of the company
(0.30)
(0.46)
(c)
Reconciliations of losses used in calculating losses per share
Consolidated
2006
2005
$
$
Basic loss per share
Profit/(Loss) from continuing operations
(1,221,245)
(806,777)
Profit/(Loss) from discontinued operations
(1,161,225)
(1,224,382)
Profit/(Loss) from discontinued operations attributable to minority intersts
63,246
333,405
Profit/(Loss) from discontinued operations attributable to the ordinary equity holders of the
company used in calculating basic earnings per share
(1,097,979)
(890,977)
-
-
Profit/(Loss) attributable to the ordinary equity holders of the company used in calculating
basic earnings per share
(2,319,224)
(1,697,754)
Diluted earnings per share
Profit/(Loss) from discontinued operations attributable to the ordinary equity holders of the
company used in calculating basic earnings per share
(1,097,979)
(890,977)
Profit/(Loss) from discontinued operations attributable to the ordinary equity holders of the
company used in calculating diluted earnings per share
(1,097,979)
(1,097,979)
Profit/(Loss( from continuing operations
(1,221,245)
(806,777)
Profit/(Loss) attributable to the ordinary equity holders of the company used in calculating
diluted earnings per share
(2,319,224)
(1,697,754)
(d)
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
777,171,727
370,789,969
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
777,171,727
370,789,969
-38-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
9
Earnings/(Loss) per share (continued)
At year end, the economic entity had 500,471,051 options on issue representing 246,040,340 options with an exercise price
of 9.82 cents and 254,430,711 options with an exercise price of 10 cents. It is unlikely that the options will be converted
into shares as the share price at the end of the year was 6.6 cents per share, which is well below the exercise price for the
options. The options have not been included in the calculation of diluted loss per share because the Directors believe that
the options are not likely to be exercised and therefore are not potentially dilutive to the ordinary shares.
10
Segment information
(a)
Description of segments
Business segments
The economic entity's operating entities are organised and managed according to the nature of the products and services
they provide, with each segment offering different products and servicing different markets. The economic entity operates
within mining and exploration, investment in information technology, telecommunications industry and corporate head office
activities.
Geographical segments
Geographically, the group operates within three predominant segments, being Australia, Philippines and Iran. The
investments in information technology and head office investments opportunities of the group take place in Australia. The
mining operations and administration are conducted in Iran and Australia. The investment in the telecommunications
industry takes place exclusively in the Philippines.
Australia
The home country of the parent entity which is also the main operating entity.
(b)
Primary reporting format - business segments
2006
Mining and
Exploration
Telecommun
ications
Corporate
Total
continuing
operations
Discontinued
operations
(note 18)
Consolidated
$
$
$
$
$
$
Sales to external customers
- -
- -
- -
Total sales revenue
- -
- -
- -
Other external revenue/income
- -
227,863 227,863
272,508 500,371
Total segment revenue/income
- -
227,863 227,863
272,508 500,371
Segment result
158,026 114,903
(1,440,121) (1,167,192)
(1,161,226) (2,328,418)
Unallocated revenue less unallocated expenses
-
Profit before income tax
(2,328,418)
Income tax expense
9,193
Profit for the year
(2,319,225)
Segment assets
21,020,893 2,928
5,785,437 26,809,258
- 26,809,258
Total assets
26,809,258
Segment liabilities
235,329 -
308,627 543,956
- 543,956
Total liabilities
543,956
Acquisitions of property, plant and equipment, intangibles and
other non-current segment assets
5,819,689 -
44,844 5,864,533
- 5,864,533
Depreciation, discount on monetary values and diminution in
asset values
(15,213) -
25,319 10,106
- 10,106
-39-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
10
Segment information (continued)
2005
Mining and
Exploration
Information
Technology
Telecommun
ication
Corporate
Total
continuing
operations
Consolidated
$
$
$
$
$
$
Sales to external customers
- 313
-
- 313
313
Total sales revenue
- 313
-
- 313
313
Other external revenue/income
21,000 -
26,779
1,563,127 1,610,906
1,610,906
Total segment revenue/income
21,000 313
26,779
1,563,127 1,611,219
1,611,219
Segment result
(178,593) (60,971)
(2,341,782)
550,187 (2,031,159)
(2,031,159)
Profit before income tax
(2,031,159)
Income tax expense
-
Profit for the year
(2,031,159)
Segment assets
15,477,672 -
5,700,000
2,288,838 23,466,510
23,466,510
Total assets
23,466,510
Segment liabilities
849,823 -
302,035
331,784 1,483,642
1,483,642
Total liabilities
1,483,642
Acquisitions of property, plant and equipment,
intangibles and other non-current segment assets
5,886,603 -
-
25,233 5,911,836
5,911,836
Depreciation, discount on monetary values and
diminution in asset values
184,048 -
-
41,924 225,972
225,972
(c)
Secondary reporting format - geographical segments
Segment revenues from
sales to external customers
Segment assets
Acquisitions of property,
plant and equipment,
intangibles and other noncurrent
segment assets
2006
2005
2006
2005
2006
2005
$
$
$
$
$
$
Australia
500,371
1,584,440
5,785,437
4,675,940
44,844
201,135
South East Asia (excluding
Philippines)
-
-
-
831,632
-
327,185
Philippines
-
26,779
2,928
5,700,000
-
-
Iran
-
-
21,020,893
12,258,938
5,819,689
5,383,516
500,371
1,611,219
26,809,258
23,466,510
5,864,533
5,911,836
11
Current assets - Cash and cash equivalents
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Cash at bank and in hand
2,337,971
1,896,569
2,293,947
1,726,379
Deposits at call
3,000,000
-
3,000,000
-
5,337,971
1,896,569
5,293,947
1,726,379
(a)
Cash at bank and on hand
For the purpose of the Statements of Cash Flows, cash includes cash on hand and in banks and deposits at call, net of
bank overdrafts. Cash at the end of the year as shown in the Statements of Cash Flows is reconciled to the related items in
the Statement of Financial position above.
-40-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
11
Current assets - Cash and cash equivalents (continued)
The parent entity earns interest from most of its cash at bank. The average of the floating interest rate at year end was
5.25% per annum (June 2005: 5.2% per annum).
(b)
Fair value
The carrying amount for cash and cash equivalents equals the fair value.
12
Current assets - Trade and other receivables
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Net trade receivables
Trade debtors
18,292
29,500
18,292
19,783
Interest receivable
495
-
495
-
GST receivable
45,318
105,641
45,318
105,641
64,105
135,141
64,105
125,424
Prepayments
47,809
51,851
47,809
36,124
111,914
186,992
111,914
161,548
* Refer to note 13 for the non-current portions of these receivables.
** Refer to note 8 for details about tax sharing and compensation agreements.
(a)
Effective interest rates risk
Information concerning the effective interest rate risk of both current and non-current receivables is set out in the noncurrent
receivables note (note 13).
13
Non-current assets - Receivables
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Net related party receivables
Loans to controlled entities (unsecured)
229,940
-
81,087,692
77,848,670
Less provision for non-recovery
(229,940)
-
(59,607,869)
(59,366,230)
-
-
21,479,823
18,482,440
* Refer to note 12 for the current portions of these receivables.
Further information relating to loans to related parties and key management personnel is set out in notes 29 and 27
respectively.
-41-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
13
Non-current assets - Receivables (continued)
(a)
Interest rate risk
The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in
the following tables.
Fixed interest maturing in:
2006
Floating
interest
rate
1 year or less
Over 1
to 2
years
Over 2
to 3
years
Over 3 to
4 years
Over 4
to 5
years
Over 5
years
Noninterest
bearing
Total
$
$
$
$
$
$
$
$
$
Other receivables
-
-
-
-
-
-
-
54,416
54,416
R&D Tax receivable
-
-
-
-
-
-
-
9,193
9,193
Prepayments
-
-
-
-
-
-
-
47,809
47,809
Interest receivable
-
-
-
-
-
-
-
495
495
-
-
-
-
-
-
-
111,914
111,913
Weighted average
interest rate
- %
- %
- %
- %
- %
- %
- %
- %
Fixed interest maturing in:
2005
Floating
interest
rate
1 year or
less
Over 1 to
2 years
Over 2
to 3
years
Over 3
to 4
years
Over 4
to 5
years
Over 5
years
Noninterest
bearing
Total
$
$
$
$
$
$
$
$
$
Other receivables
-
-
-
-
-
-
-
135,141
135,141
-
-
-
-
-
-
-
135,141
135,141
14
Non-current assets - Other financial assets
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Security deposits
20,000
5,266
20,000
-
Bank guarantees
45,260
205,760
45,260
45,260
65,260
211,026
65,260
45,260
These financial assets are carried at cost.
Bank guarantees
On 26 November 2002 the parent entity lodged a bank guarantee with the Queensland Department of Mines and Energy to
be held as security to indemnify the Queensland State Government for compliance with the Mineral Resources Act (1989)
and Environmental Protection Act (1994). The total bank guarantee lodged is not recoverable and will remain in force until
the payment of $45,260 or restorations are made. The Queensland Department of Mines and Energy will notify the bank in
writing at the time when the guarantee is no longer required. The balance guarantee deposit is earning a floating interest
rate of between 5.2% and 5.4% (2005: 4.9% and 5.2%).
On 21 June 2006 the parent entity lodged a security deposit of $20,000 with PRD (Colliers International) to be held as
security for the office premise lease. The deposit is earning an average floating interest rate of between 5.2% and 5.25%.
-42-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
15
Non-current assets - Available-for-sale financial assets
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
At beginning of year
6,030,560
8,044,596
1,979,284
2,066,570
Disposals
(5,584,735)
(1,961,125)
(1,302,645)
(87,286)
Provision for impairment
(129,843)
(52,908)
(129,843)
-
At end of year
315,982
6,030,563
546,796
1,979,284
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Shares in associates at cost (a)
44,596
44,596
-
-
Shares in controlled entities (b)
-
-
275,410
275,410
Other investments
Shares in controlled entities (c)
401,231
285,964
401,231
3,316,422
Less provision for diminution
(129,842)
-
(129,845)
(1,612,548)
Investment in AGNI/ETPI
-
23,232,358
-
-
Less provision for diminution
-
(17,532,358)
-
-
271,389
5,985,964
271,386
1,703,874
315,985
6,030,560
546,796
1,979,284
(a)
MZC is an incorporated joint venture that operates the Mehdiabad Zinc Project in Iran. The operating costs of MZC have
been capitalised in the exploration and evaluation expenditure.
(b)
Shares in Union Zinc Pty Ltd.
(c)
The economic entity holds shares in Jab Technologies Limited and Gold Aura Limited which are both Australian public
listed companies.
-43-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
16
Non-current assets - Property, plant and equipment
Consolidated
Plant and
equipment
$
Year ended 30 June 2005
Opening net book amount
55,963
Additions
33,196
Disposals
(4,209)
Depreciation charge
(54,762)
Closing net book amount
30,188
At 30 June 2005
- Cost
2,862,947
Accumulated depreciation
(2,832,759)
Net book amount
30,188
Consolidated
Plant and
equipment
$
Year ended 30 June 2006
Opening net book amount
30,188
Additions
45,517
Disposals
-
Disposal of Gold Aura consolidated group
-
Depreciation charge
(27,768)
Differences in opening and closing balances
-
Closing net book amount
47,937
At 30 June 2006
- Cost
1,190,730
Accumulated depreciation
(1,142,793)
Net book amount
47,937
Parent
Plant and
equipment
$
Year ended 30 June 2005
Opening net book amount
40,092
Additions
25,234
Depreciation charge
(41,924)
Closing net book amount
23,402
At 30 June 2005
- Cost
298,251
Accumulated depreciation
(274,849)
Net book amount
23,402
-44-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
16
Non-current assets - Property, plant and equipment (continued)
Parent
Plant and
equipment
$
Year ended 30 June 2006
Opening net book amount
23,402
Additions
44,845
Depreciation charge
(25,319)
Closing net book amount
42,928
At 30 June 2006
- Cost
343,096
Accumulated depreciation
(300,168)
Net book amount
42,928
17
Non-current assets - Exploration and evaluation expenditure
(a)
Exploration and evaluation
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Capitalised exploration, evaluation and development
expenditures:
Cost: In exploration and/or evaluation stage
Opening balance
15,111,175
20,095,594
-
-
Expenditure incurred
8,735,707
5,878,640
-
4,768
Discount on acquisition
-
(20,173)
-
-
Contribution from earn-in partner
-
(5,396,199)
-
-
Provision for diminution/amortisation
-
(5,446,687)
-
(4,768)
Disposal of Subsidiary
(2,916,691)
-
-
-
Closing balance
20,930,191
15,111,175
-
-
Opening balances are gross of provision for diminution.
The ultimate recovery of the carrying value of the capitalised exploration, evaluation and development expenditures is
primarily dependent upon the successful development and commercial exploitation, or alternatively, the sale of the relevant
areas of interest at amounts in excess of their book values. Exploration and evaluation expenditure is capitalised in
accordance with the accounting policy outlined in note 1.
Earn in funds
At 30 June 2006, the Group has funded $20,930,191 of the feasibility study and other activities associated with the
Mehdiabad Zinc Company project. At 31 March 2006 this figure was $20,145,622. As these amounts include all
expenditure associated with the project both in Iran and Australia, a portion of this balances is not subject to earn in rights.
At 30 June 2006 this portion approximated $1.6 million.
Audited Mehdiabad Zinc Company financial statements for the Iranian year ended 20 March 2006 disclose $9,794,628 as
‘liabilities convertible to capital’. Those financials do not include approximately $9,500,000 valid project expenditure under
the project agreements that should be approved and accepted by the MZC Board to convert to capital.
The Company holds a Board Certificate from Mehdiabad Zinc Company, effective at 20 March 2006, advising an amount
equal to $9,794,628 has been recorded as its earn in in the books of account of Mehdiabad Zinc Company. A Board
Certificate is similar to a coverting note. As at the date of this report, it is not possible to estimate when further Certificates
will be issued, how much they will be for or when they will convert to shares.
-45-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
17
Non-current assets - Exploration and evaluation expenditure (continued)
However, it is acknowledged there is some risk all or part of both the liabilities convertible to equity and the unapproved and
not accepted funds may not ultimately be converted to equity. Notwithstanding this reservation, the Company believes the
carrying amount of its investment in the Mehdiabad Zinc Company project does not exceed its recoverable amount.
Exploitation Licence
Transfer of the Exploitation Licence from an Iranian Government authority to Mehdiabad Zinc Company is anticipated when
a firm development decision is made. At the date of this report it is not possible to estimate the timing.
Foreign Investment Licence
The Company holds a current Foreign Investment Licence. The licence is formal recognition of, and provides partitial
protection for, the Group's investment in MZC. It does not convey any right for conversion of expenditure to capital.
18
Discontinued operations
Discontinued operations Gold Aura Limited
(a)
Description
On 13 September 2005, with effect from 13 September 2005, the Company completed an in specie share distribution of
Gold Aura Limited shares to eligible Union shareholders. The division disposed of, is reported in this financial report as a
discontinued operation.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below. Further
information is set out in note 10 - segment information.
(b)
Financial performance and cash flow information
The financial performance and cash flow information presented are from 1 July to 13 September 2005 and the year ended
30 June 2005.
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Revenue (note 4)
2,974
43,927
-
-
Expenses
(92,013)
(566,729)
-
-
Profit before income tax
(89,039)
(522,802)
-
-
Income tax expense
-
-
-
-
Profit after income tax of discontinued operations
(89,039)
(522,802)
-
-
Loss on sale of the division before income tax
(1,187,090)
-
-
-
Income tax expense
-
-
-
-
Loss on sale of the division after income tax
(1,187,090)
-
-
-
Loss from discontinued operations
(1,276,129)
(522,802)
-
-
Net cash inflow from operating activities
(165,607)
(365,305)
-
-
Net cash inflow (outflow) from investing activities
(34,050)
(435,644)
-
-
Net cash (outflow) from financing activities
600,501
619,246
-
-
Net increase in cash generated by the division
400,844
(181,703)
-
-
-46-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
18
Discontinued operations (continued)
(c)
Carrying amounts of assets and liabilities
The carrying amounts of assets and liabilities as at 13 September 2005 and 30 June 2005 are disclosed as 2006 and 2005
below, respectively.:
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Cash assets
557,617
156,774
-
-
Property, plant and equipment
51,165
55,952
-
-
Trade receivables
30,008
9,718
-
-
Exploration Plant and equipment
4,180,382
4,138,178
-
-
Other assets
178,126
181,493
-
-
Total assets
4,997,298
4,542,115
-
-
Trade creditors
(75,264)
(176,415)
-
-
Provision for employee benefits
(53,118)
(31,311)
-
-
Accruals
(23,066)
-
-
-
Total liabilities
(151,448)
(207,726)
-
-
Net assets
4,845,850
4,334,389
-
-
-47-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
18
Discontinued operations (continued)
(d)
Details of the sale of the division
The details of sale of the division presented are for the months to 13 September 2005 and the year ended 30 June 2005.
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Consideration received or receivable:
In specie distribution to Union Resources Limited
shareholders
(912,849)
-
-
-
Total disposal consideration
(912,849)
-
-
-
Carrying amount of net assets sold
2,929,975
-
-
-
Elimination of consolidated entries
1,482,502
-
-
-
Reversal of impairment of Gold Aura Limited shares
(718,296)
-
-
-
Loss from discontinued operations
(89,039)
-
-
-
Retained Losses (1st July 2005)
(1,505,203)
-
-
-
Loss on sale before income tax
1,187,090
-
-
-
Income tax expense
-
-
-
-
Loss on sale after income tax
1,187,090
-
-
-
-48-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
18
Discontinued operations (continued)
Discontinued operations ETPI
(a)
Description
The Company disposed of its interest in ETPI on 15th March 2006 and this division disposed of, is reported in this financial
report as a discontinued operation.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below. Further
information is set out in note 10 - segment information.
(b)
Financial performance and cash flow information
The financial performance and cash flow information presented are for the months to 13 September 2005 and the year
ended 30 June 2005.
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Revenue (note 4)
5,797
1,669,394
-
-
Expenses
(2,871)
(2,370,974)
-
-
Profit before income tax
2,926
(701,580)
-
-
Income tax expense
-
-
-
-
Profit after income tax of discontinued operations
2,926
(701,580)
-
-
Profit on sale of the division before income tax
111,977
-
-
-
Income tax expense
-
-
-
-
Profit on sale of the division after income tax
111,977
-
-
-
Profit from discontinued operations
114,903
(701,580)
-
-
Net cash inflow from operating activities
-
-
-
-
Net cash inflow (outflow) from investing activities
2,926
-
-
-
Net cash (outflow) from financing activities
-
-
-
-
Net increase in cash generated by the division
2,926
-
-
-
-49-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
18
Discontinued operations (continued)
(c)
Carrying amounts of assets and liabilities
The carrying amounts of assets and liabilities as at 13 September 2005 and 30 June 2005 are:
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Cash assets
2,928
2
-
-
Investment ETPI
-
5,700,000
-
-
Trade receivables
-
-
-
-
Exploration Plant and equipment
-
-
-
-
Other assets
-
-
-
-
Total assets
2,928
5,700,002
-
-
Loans Payable
(16,090,468)
(21,842,050)
-
-
Other Payables
-
(302,035)
-
-
Accruals
-
-
-
-
Total liabilities
(16,090,468)
(22,144,085)
-
-
Net assets
(16,087,540)
(16,444,083)
-
-
(d)
Details of the sale of the division
The details of sale of the division presented are for the months to 13 September 2005 and the year ended 30 June 2005.
Consideration received or receivable:
In specie distribution to Union Resources Limited
shareholders
(5,631,175)
-
-
-
Total disposal consideration
(5,631,175)
-
-
-
Carrying amount of net assets sold
5,367,438
-
-
-
Diminution of carrying value of asset
128,384
-
-
-
Foreign exchange loss
23,376
-
-
-
Loss from discontinued operations
-
-
-
-
Retained Losses (1st July 2005)
-
-
-
-
Loss on sale before income tax
(111,977)
-
-
-
Income tax expense
-
-
-
-
Loss on sale after income tax
(111,977)
-
-
-
In accordance with the Escrow Agreement executed in November 2005 between Australian Gigahertz International Pty Ltd
(“AGI”), ISM Communications Corporation (“ISM”), A.G.N. Philippines Inc. (“AGNP”) and Union Management Pty Ltd
“UML”), an amount of US$500,000 was retained from the settlement proceeds from the sale of Eastern
Telecommunications of the Philippines Inc (“ETPI”) to cover any potential tax liabilities that may have been incurred and
not paid or remitted to the Filipino Bureau of Internal Revenue (“BIR”) by AGNP or AGNI as of the date of the sale of ETPI
("Tax Retention Moneys").
Union Management Pty Ltd’s share of the Retention Monies of approximately AUD $360,541 has not been recognised as a
receivable at 30 June 2006 as the amount of Tax Retention Monies earned is dependent upon an investigation of the
potential BIR liabilities that may have been incurred and cannot be reliably measured at this stage.
19
Current liabilities - Trade and other payables
Consolidated
Parent
-50-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
19
Current liabilities - Trade and other payables (continued)
2006
2005
2006
2005
$
$
$
$
Trade payables
402,092
997,903
402,092
886,480
Accrued expenses
101,032
99,025
101,032
45,777
503,124
1,096,928
503,124
932,257
20
Current liabilities - Provisions
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Employee entitlements
24,501
41,364
24,501
20,170
24,501
41,364
24,501
20,170
The average number of employees during the year was six.
Union offers employees an incentive scheme through the "Directors and Employees Share Option Plans", which was
approved by shareholders on 8 July 1999. Pursuant to the "Directors and Employees Share Option Plan" granted on 15
December 2000, 14.55 million options were issued to Directors and employees of Union in the 2001 year. After the 1 for 10
consolidation, there were 1,060,000 options remaining exercisable at 297 cents per option, non-listed, non-transferable and
non-assignable, which expired on 30 September 2005.
The consolidated entity contributes 9% of the employees' wages and salaries to various accumulated superannuation
funds.
21
Non-current liabilities - Provisions
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Employee entitlements
16,331
43,315
16,331
33,197
16,331
43,315
16,331
33,197
Amounts for long service leave that are expected to be settled more than 12 months from the reporting date.
-51-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
22
Contributed equity
Parent
Parent
2006
2005
2006
2005
Shares
Shares
$
$
(a)
Share capital
Ordinary shares
Fully paid
777,171,727
500,153,555
88,857,141
80,419,340
Total contributed equity
88,857,141
80,419,340
(b)
Movements in ordinary share capital:
Date
Details
Number of
shares
$
1 July 2004
Opening balance
306,641,909
75,546,218
Placement of shares at 3 cents
108,000,000
3,240,000
Private Placement of shares at 3.65 cents
56,963,691
2,079,175
Prospectus Placement shares at 3.65 cents
15,050,340
549,337
Share purchase plan at 3.65 cents
12,833,231
468,413
Directors fees
664,384
24,000
Less: Transaction costs arising on share issue
-
-
Share issue costs
-
(236,527)
Jab Technologies In Specie shares
-
(1,251,276)
30 June 2005
Balance
500,153,555
80,419,340
1 July 2005
Opening balance
500,153,555
80,419,340
Placement of shares at 3.0 cents
7,000,000
210,000
Placement of shares at 3.0 cents
76,000,000
2,280,000
-
-
-
-
Options converted to shares at 10.0 cents
10,000
1,000
Placement Prospectus shares at 3.0 cents
101,430,711
3,042,921
Placement shares at 3.0 cents
75,000,000
2,250,000
Placement shares at 6.3 cents
17,417,461
1,097,300
Placement shares at 6.3cents
160,000
10,080
89,310,641
Less: Transaction costs arising on share issue
-
Share issue costs
(453,500)
30 June 2006
Balance
777,171,727
88,857,141
(c)
In Species Shares, 6,256,382 Jab Technologies shares at 20 cents.
(d)
During the year the company incurred share issue costs totaling $453,500.
-52-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
22
Contributed equity (continued)
(e)
Options to acquire issued share capital
Each option entitles the holder to purchase one share. The names of all persons who currently hold share options, granted
at any time, are entered in the register kept by the Company, pursuant to Section 168 of the Corporations Act 2001, which
may be inspected free of charge. Persons entitled to exercise these options have no right, by virtue of the options, to
participate in any share issue by the parent entity or any other body corporate.
Date
Details
Number of
options
1 July 2005
Opening balance
237,110,340
31 March 2009 - Listed "UCLOA"
13,990,000
31 March 2009 - Listed "UCLOB"
254,430,711
30 September 2005 - Directors & Employees
(1,060,000)
31 March 2006 - Unlisted
(4,000,000)
30 June 2006
Balance
500,471,051
Ordinary shares entitle the holder to participate in dividends.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and
upon a poll each share is entitled to one vote.
23
Reserves and accumulated losses
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
(a)
Reserves
Asset revaluation reserve
-
370,270
-
-
Option premium reserve
821,159
821,159
821,159
821,159
821,159
1,191,429
821,159
821,159
The asset revaluation reserve has resulted from the revaluation of the opening exploration, evaluation and development
expenditure in accordance with the independent geologist report, a summary of which is contained in section 11 of Gold
Aura's prospectus dated 30 July 2002. As at 30th June 2006 the minority interest share of the asset revaluation reserve
was $624,199. The asset revaluation reserve was eliminated as a result of the disposal of Gold Aura Limited.
(b)
Accumulated losses
Movements in retained profits were as follows:
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Opening retained earnings
(61,202,493)
(59,504,739)
(59,807,810)
(58,163,041)
Net profit/(loss) attributable to members of Union
Resources Limited
(2,319,225)
(1,697,754)
(2,873,778)
(1,644,769)
Change in minority interest
108,720
-
-
-
Balance 30 June 2006
(63,412,998)
(61,202,493)
(62,681,588)
(59,807,810)
-53-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
24
Minority interest
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Interest in:
Share capital
-
1,877,952
-
-
Reserves
-
651,728
-
-
Accumulated losses
-
(955,088)
-
-
-
1,574,592
-
-
25
Commitments
(a)
Operating leases
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Commitments for minimum lease payments in relation to
non-cancelable operating leases are payable as follows:
Within one year
38,805
60,482
38,805
32,233
Later than one year but not later than five years
92,193
172,967
92,193
70,974
Later than five years
-
-
-
-
Commitments not recognised in the financial statements
130,998
233,449
130,998
103,207
Operating leases are entered into to enable access to utilise office premises and equipment. Rental payments are fixed.
(b)
Exploration Expenditure
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Within one year
-
37,464
-
-
Later than one year and not later than five years
-
178,784
-
-
Later than five years
-
-
-
-
-
216,248
-
-
(c)
Remuneration commitments
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Commitments for the payment of salaries and other
remuneration under long-term employment contracts in
existence at the reporting date but not recognised as
liabilities, payable:
Within one year
266,000
-
266,000
-
Later than one year and not later than five years
800,000
-
800,000
-
Later than five years
-
-
-
-
1,066,000
-
1,066,000
-
-54-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
25
Commitments (continued)
Amounts disclosed as remuneration commitments include commitments arising from the service contracts of key
management personnel referred to in section C of the remuneration report on pages 13 that are not recognised as liabilities
and are not included in the key management personnel compensation.
26
Contingencies
(a)
Contingent liabilities
Contingent liabilities at balance date, not otherwise provided for in these financial statements are categorised as follows:
Contracts of employment
A contingent liability exists in respect of the contract of service agreement between the Company and Geophysical
Research Pty Ltd (“GR”), a company associated with Mr Rob Murdoch in the event that GR ceases to provide services
under the agreement, other than as a consequence of certain defined events. At this stage it is not practical to estimate the
financial effect of this contingent liability on the financial statements. The relevant information relating to the agreement can
be found in section C of the remuneration report section of the Directors' report.
Security Bonds
The maximum liability of the economic entity for security bonds lodged and insurance bonds issued is $45,260 (June 2005:
$211, 026)
(b)
Contingent assets
In accordance with the Escrow Agreement executed in November 2005 between Australian Gigahertz International Pty Ltd
(“AGI”), ISM Communications Corporation (“ISM”), A.G.N. Philippines Inc. (“AGNP”) and Union Management Pty Ltd
“UML”), an amount of US$500,000 was retained from the settlement proceeds from the sale of Eastern
Telecommunications of the Philippines Inc (“ETPI”) to cover any potential tax liabilities that may have been incurred and
not paid or remitted to the Filipino Bureau of Internal Revenue (“BIR”) by AGNP or AGNI as of the date of the sale of ETPI
("Tax Retention Moneys").
Union Management Pty Ltd is entitled to receive a 54.8% share of the Tax Retention Money plus any interest earned on
such funds less any amounts deducted from such funds including:
a) any amount of an assessment order provided by the BIR to AGNP regarding unpaid taxes of AGNP prior to the closing
date (to date there have been no such assessment notices provided);
b) any agreed fees payable to the escrow agent; and
c) agreed fees of US$14,801 in respect of professional fees in relation to the completion of this matter and obtaining the
necessary certificates from BIR.
Union Management Pty Ltd’s share of the Retention Monies of approximately AUD $360,541 has not been recognised as a
receivable at 30 June 2006 as the amount of Tax Retention Monies earned is dependent upon an investigation of the
potential BIR liabilities that may have been incurred and cannot be reliably measured at this stage.
Contingent liabilities
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Bank Guarantee held by Queensland Department of
Mines
45,260
205,760
-
45,260
Security bonds lodged with PNG Department of Mining
& Petroleum
-
5,266
-
-
45,260
211,026
-
45,260
-55-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
27
Directors and key management personnel disclosures
(a)
Directors and key management personnel compensation
The following tables compare the Directors and key management personnel remuneration for the year ended June 30 2005
compared to year ended 30 June 2006. Income paid or payable or otherwise made available to Directors by entities in the
consolidated entity and related parties in connection with the management of the affairs of the parent entity or its controlled
entity. The Directors and Key management personnel remuneration have been determined on the basis of the cost to the
entity which includes specific benefits and GST.
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Directors short-term benefits
428,332
523,038
421,244
447,288
Key management personnel short-term benefits
203,471
408,308
203,471
217,321
Share-based payments
-
24,000
-
24,000
Total Directors and Executives benefits
631,803
955,346
624,715
688,609
The Group has taken advantage of the relief provided by Corporations Amendment Regulations 2006 (No.4) which has
made amendments to Regulation 2M.3.03 and Schedule 5B of the Corporations Regulations and has transferred the
detailed remuneration disclosures to the Directors’ Report. The relevant information can be found in sections A-C of the
Remuneration Report on pages10 to 13.
(b)
Service agreements
Remuneration and other terms of employment for the Directors and the Key management personnel are formalised in
service contracts. Each of these agreements provide of the provision of remuneration. The major provisions of the
agreements relating to remuneration are set out below:
R B Murdoch (Chief Executive Officer)
·
Union Resources Limited: Base Salary of $200,000 per annum plus travel, accommodation and general out of
pocket expenses
·
Gold Aura Limited: Base Salary of $125 per hour plus travel, accommodation and general out of pocket expenses
·
Period of Termination - Three (3) Months
J Lemon (Company Secretary)
·
Base Salary of $85 plus GST per hour for Company Secretarial and $125 plus GST per hour for legal services.
·
Period of Termination - Four (4) Weeks
C C Estwick (Chief Financial Officer)
·
Base salary, inclusive of superannuation, $125.00 per hour.
·
Period of Termination - Four (4) Weeks
M J Ilett (Consultant Accountant)
·
Base Salary $85 per hour including GST
·
Period of Termination - Four (4) Weeks
The Directors and executives received no remuneration in the form of cash bonuses, non-monetary benefits, post
employment retirement benefits, equity options or other bonuses during the financial period.
(c)
Equity instrument disclosures relating to Directors and key management personnel
Equity provided as remuneration
There were no options or shares provided as remuneration to Directors or key management personnel during the year
ended June 2006.
(i)
Option holdings
The numbers of options over ordinary shares in the company held during the financial year by each director of Union
Resources Limited and other key management personnel of the Group, including their personally related parties, are set out
below.
-56-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
27
Directors and key management personnel disclosures (continued)
2006
Name
Balance at
the start of
the year
Granted during
the year as
compensation
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
Directors of Union Resources Limited
R B Murdoch
525,000
-
-
-
525,000
-
I J Burton
-
-
-
-
-
-
J D Collins-Taylor
14,000,000
-
-
(14,000,000)
-
-
I W Ross
-
-
-
507,032
507,032
-
No options are vested and unexercisable at the end of the year.
2005
Name
Balance at
the start of
the year
Granted during
the year as
compensation
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
Directors of Union Resources Limited
R B Murdoch
475,000
-
-
(50,000)
425,000
-
I J Burton
100,000
-
-
-
100,000
-
J D Collins-Taylor
-
-
-
14,000,000
14,000,000
-
I W Ross
-
-
-
-
-
-
(ii)
Share holdings
The numbers of shares in the company held during the financial year by each director of Union Resources Limited and
other key management personnel of the Group, including their personally related parties, are set out below. There were no
shares granted during the reporting period as compensation.
2006
Name
Balance at the
start of the
year
Received during
the year on the
exercise of
options
Other changes
during the year
Balance at
the end of
the year
Directors of Union Resources Limited
Ordinary shares
R B Murdoch
47,059,002
-
(893,199)
46,165,803
I J Burton
-
-
-
-
J D Collins-Taylor
43,527,411
-
(43,527,411)
-
I W Ross
1,000,000
-
507,032
1,507,032
2005
Name
Balance at the
start of the
year
Received during
the year on the
exercise of
options
Other changes
during the year
Balance at
the end of
the year
Directors of Union Resources Limited
Ordinary shares
R B Murdoch
44,832,002
-
2,227,000
47,059,002
I J Burton
939,435
-
-
939,435
J D Collins-Taylor
-
-
43,527,411
43,527,411
I W Ross
-
-
1,000,000
1,000,000
28
Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non-related audit firms:
-57-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
28
Remuneration of auditors (continued)
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Pitcher Partners audit or review of financial reports of
the entity or any entity in the consolidated entity
57,205
44,550
57,205
30,250
Pitcher Partners non-audit services
63,040
22,346
63,040
21,202
29
Related party transactions
(a)
Ultimate controlling entity
The ultimate controlling entity of the economic entity is Union Resources Limited.
(b)
Directors
The following persons have held the position of Director of Union Resource Limited during the past two years, unless
otherwise stated:
I J Burton
R B Murdoch
I W Ross - Director since 23 June 2005
J D Collins-Taylor - Director since 18 May 2005
K Waplan - Director since 12 September 2005
K E Larsson - Director since 12 September 2005
-58-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
29
Related party transactions (continued)
(c)
Remuneration of Directors
Information on remuneration of Directors is disclosed in note 27.
During the year Murdoch Geosciences Pty Ltd, a company associated with Mr. Robert Murdoch, charged at cost $275,100
to the economic entity for provision of his labour and related party transactions.
(d)
Transactions with controlled entities
During the year the parent entity advanced funds to its controlled entities. The amounts due from the controlled entities at
year end are shown in Note. 13.
(e)
Loans to/from related parties
Loans to subsidiaries
Beginning of the year
-
-
-
-
Loans advanced
-
-
-
-
Loan repayments received
-
-
-
-
End of year
-
-
-
-
30
Subsidiaries
Name of entity
Country of
incorporation
Class of shares
Percentage ownership
2006
2005
%
%
Controlled entities (a)
Union Resource Management Limited
Australia
Ordinary
100
100
Union Zinc Pty Ltd
Australia
Ordinary
100
100
Union Management Pty Ltd
Australia
Ordinary
100
100
*
These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with
Class Order 98/1418 issued by the Australian Securities and Investments Commission. For further information
refer to
**
The proportion of ownership interest is equal to the proportion of voting power held.
(a)
The years of all controlled entities are the same as that of the parent. All controlled entities operate solely in their
place of Incorporation
(b)
On 13 September 2005 the Company completed an in specie share distribution of 10,142,764 Gold Aura Limited
shares to the eligible Union Resource shareholders on the basis of one (1) ordinary Gold Aura Share for every fifty
(50) Union Resource shares held. The shares have been distributed equally to eligible Union Resource
shareholders on a pro rata basis based on the number of shares held on the record date on 7 September 2005.
As the result of the in specie share distribution the Company currently holds 0.96% of the capital in Gold Aura
Limited and Gold Aura Limited and its subsidiary are no longer part of the consolidated group.
-59-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
31
Reconciliation of profit after income tax to net cash inflow from operating activities
Consolidated
Parent
2006
2005
2006
2005
$
$
$
$
Net profit/(loss)
(2,382,471)
(2,031,159)
(2,873,778)
(1,644,769)
Adjustments for non-cash income and expense items:
Depreciation and amortisation
10,106
54,762
25,319
41,924
Income Tax Benefit
(9,193)
-
(9,193)
-
Diminution of value of investments
57,625
2,516,881
57,625
406,602
Gain on disposal of Jab Technologies
-
(1,464,607)
-
(993,551)
Debt forgiveness
128,384
-
241,640
1,640,201
Loss on disposal of Gold Aura Limited
1,905,386
-
2,017,126
-
Reversal of impairment Gold Aura Limited Shares
(718,296)
-
(627,478)
-
Gain on Disposal of ETPI
(263,737)
-
-
-
Net foreign exchange gains/(losses)
22,130
26,779
-
(32)
Shares issued to Directors in lieu of Directors' fees
-
24,000
-
24,000
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
84,271
(114,762)
40,441
(112,148)
Decrease/(Increase) in prepayments and other
assets
-
80,871
-
(17,701)
(Decrease)/increase in trade creditors and accruals
(39,675)
179,846
141,772
29,540
(Decrease)/increase in employee entitlements
(43,847)
(11,829)
(12,535)
(10,337)
Net cash (outflow) inflow from operating activities
(1,249,317)
(739,218)
(999,061)
(636,271)
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Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
32
Explanation of transition to Australian equivalents to IFRSs
The consolidated entity changed its accounting polocies on 1 July 2005 to comply with Australian equivalents to
International Financial Standards (IFRS). The transition to AIFRS is accounted for in accordance with Accounting
Standards AASB 1 "First time Adoption to International Fianancial Reporting Standards" with 1 July 2004 as the date of
transition.
(1)
Reconciliation of equity as reported under previous AGAAP to that under IFRS. The previous adoption of AIFRS has
not resulted in any material adjustments to the balance sheet under AGAAP.
Consolidated
Parent
30 June
2005
31
December
2004
1 July 2004
30 June
2005
31
December
2004
1 July 2004
$
$
$
$
$
$
Total Equity under previous
AGAAP
21,982,568
18,582,782
18,579,268
21,432,689
19,876,960
18,204,336
Changes from AGAAP to IFRSs
-
-
-
-
-
-
Total equity under AIFRS
21,982,868
18,582,782
18,579,268
21,432,689
19,876,960
18,204,336
(2)
Reconciliation of profit under previous AGAAP to that under IFRSs (AIFRS). The adoption of AIRFS has not resulted in
any material adjustments of income presented under AGAAP.
Consolidated
Parent
30 June
2005
31
December
2004
1 July 2004
30 June
2005
31
December
2004
1 July 2004
$
$
$
$
$
$
Loss under previous AGAAP
(1,697,754)
(1,750,909)
(1,232,272)
(1,644,769)
487,060
(983,771)
Changes from AGAAP to IFRSs
-
-
-
-
-
-
Profit/(loss) under AIFRS
(1,697,754)
(1,750,909)
(1,232,272)
(1,644,769)
487,060
(983,771)
(3)
Explanation of material adjustment to the cash flow statement
There is no material difference of cash flow statements presented under AIFRS and those presented under AGAAP.
(4)
Notes to the reconciliations
(a)
Impairment
Under AASB 136 "Impairment of Assets", the recoverable amount of an asset is determined as the higher of its net selling
price and value in use which is determined using discounted cash flows. Impairment is assessed at an asset level or where
an asset does not generate separately identifiable cash flows, impairment is assessed on a cash generating unit basis,
being the smallest group of assets that generates independent cash flows. Under AGAAP, future cash flows are not
discounted and assets are grouped together under an area of interest concept, which include all of the exploration and
evaluation assets within a geological area.
Currently each area of interest for the Group is considered to be either Greenfield or Brownfield exploration project and the
Group has to continue to carry forward its capitalised exploration and evaluation expenditure on the basis outlined in note 1.
-61-
Union Resources Limited
Notes to the financial statements
30 June 2006
(continued)
32
Explanation of transition to Australian equivalents to IFRSs (continued)
(b)
Income tax
Under AASB 112 "Income Taxes", the consolidated entity will be required to use a balance sheet liability method, rather
than the income statement method, which recognises deferred tax balances where there is a difference between the
carrying value of an asset or liability and its tax base. A deferred tax asset is recognised to the extent that it is probable that
there will be a taxable profit against which a deductible temporary difference can be used.
Even though the test for the adoption of deferred tax assets and tax affect accounting has moved from virtually certain to
probable, the Company maintains it is not probable that future tax profit will be available to offset losses and the existence
of unused tax and recent tax losses is evidence that future taxable profits are not available for recognition of deferred tax
losses.
33
Events occurring after the balance sheet date
Issue of options
On 24 August 2006 the Company issued 10,000 options exercisable at 10 cents per option on or before 31 March 2009 to
Societe Generale as consideration for the provision of financial advisory services in connection with the Mehdiabad Project;
and 90,000,000 options exercisable at 10 cents per share on or before 31 March 2009 to RAB Special Situations (Master)
Fund Limited.
-62-
Union Resources Limited
Directors' declaration
30 June 2006
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 19 to 62 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(ii)
giving a true and fair view of the company’s and consolidated entity's financial position as at 30 June 2006
and of its performance, as represented by the results of its operations, changes in equity and its cash
flows, for the financial year ended on that date; 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; and
(c)
the audited remuneration disclosures set out on pages 10 to 13 of the directors’ report comply with Accounting
Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001; and
The directors have been given the declarations by the chief executive officer and chief financial officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
R B Murdoch
Director
Brisbane
29 September 2006
-63-
1
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
UNION RESOURCES LIMITED
Scope
The financial report, remuneration disclosures and directors’ responsibilities
The financial report comprises the balance sheet, income statement, statement of changes in equity, cash flow statement,
accompanying notes to the financial statements, and the directors’ declaration for both Union Resources Limited (the
company) and Union Resources Limited group (the consolidated entity), for the year ended 30 June 2006. The
consolidated entity comprises both the company and the entities it controlled during that year.
As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration of
directors and executives (“remuneration disclosures”), required by Accounting Standard AASB 124 Related Party
Disclosures, under the heading “remuneration report” in pages 9 to 12 of the directors’ report and not in the financial
report.
The Directors of the company are responsible for the preparation and true and fair presentation of the financial report in
accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting
records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and
accounting estimates inherent in the financial report.
The directors also are responsible for preparation and presentation of the remuneration disclosures contained in the
directors’ report in accordance with the Corporations Regulations 2001.
Audit approach
We conducted an independent audit in order to express an opinion to the members of the company. Our audit was
conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the
financial report is free of material misstatement and that the remuneration disclosures in the directors’ report comply
with Accounting Standard AASB 124.. 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 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 in the directors’ report comply with Accounting Standard AASB
124.
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 in the directors’ report; and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of
significant accounting estimates made by the Directors.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the
nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001.
2
Audit opinion
In our opinion:
(1) the financial report of Union Resources Limited is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as
at 30 June 2006 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 9 to 12 of the directors’ report comply with Accounting
Standard AASB 124.
Inherent uncertainty regarding continuation of going concern
Without qualification to the statement expressed above, attention is drawn to the following matter.
As a result of the matters described in Note 1 to the financial statements, the consolidated entity has the ability to
continue as a going concern so long as the entity is not materially affected by an adverse change in the external
environment in which it operates. The financial report does not include any adjustments relating to the recoverability
and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary
should the consolidated entity not continue as a going concern.
Inherent uncertainty regarding capitalised mineral exploration costs
Without qualification to the statement expressed above, attention is also drawn to the following matters:
(a) capitalised exploration and development costs totalling $20,930,191 (2005: $15,111,175) have been included in
the consolidated entity’s Balance Sheet as non-current assets (refer note 17).
The ultimate recovery of the carrying values of these assets is dependent upon their successful development and
commercial exploitation or, alternatively, the sale of the relevant assets at amounts in excess of their book
values.
(b) as stated in note 17 (a), of total exploration and development costs referred to in paragraph (a) above,
approximately $19.3 million is subject to earn in rights. The consolidated entity has been issued with “Board
Certificates” for an amount equal to $9,794,628.
It is not possible to estimate when further certificates will issue, how much they will be for or when they will
convert to shares.
PITCHER PARTNERS
R J ST CLAIR
Partner
Brisbane, 29 September 2006
Union Resources Limited
Shareholder information
30 June 2006
The shareholder information set out below was applicable as at 25 September 2006.
A.
Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Class of equity security
Ordinary
Shares
Options
UCLOA
Options
UCLOB
1
-
1000
541,443
-
34,030
-
1,001
-
5,000
3,037,426
4,000
338,039
-
5,001
-
10,000
3,307,629
10,000
412,635
-
10,001
-
100,000
34,780,818
1,415,353
10,037,223
-
100,001
and over
735,504,411
244,610,987
253,608,784
-
777,171,727
246,040,340
264,430,711
-
There number of security investors holding less than a marketable parcel of 25,000 securities ($.020 on
22/9/2006) is 345 and they hold 2,021,064 securities.
B.
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
Ordinary shares
Number held
Percentage of
issued shares
HSBC Custody Nominees (Australia) Limited
179,821,570
23.14
ANZ Nominees Limited
133,883,546
17.23
Westpac Custodian Nominees Limited
116,925,432
15.04
Merrill Lynch (Australia) Nominees Pty Limited
48,241,852
6.21
Austex Mining NL
38,121,003
4.91
Societe Generale Australia Branch
25,846,154
3.33
Bow Lane Nominees Pty Ltd
23,563,298
3.03
National Nominees Limited
19,224,250
2.47
Capita IRG Trustees Limited
11,543,300
1.49
Mr Robert Murdoch
5,914,800
0.76
Kingsway Capital Holdings Corporation
4,500,000
0.58
Mr Richard Hoskins + Gail Francis Hoskins
3,350,000
0.43
Citicorp Nominees Pty Limited
2,732,229
0.35
Mr Mark Randall Warnecke + Mrs Virginia Jennifer Jane Warnecke Super A/C>
2,677,515
0.34
Takita Exploration Pty Limited
2,500,000
0.32
Austex Mining NL
2,030,000
0.26
Mr Ian James Lewis
2,000,000
0.26
Mrs Virginia Warnecke
1,995,882
0.26
Wuudee Australia Pty Limited
1,887,000
0.24
Mr Noubar Nick Pezikian
1,786,180
0.23
628,544,011
80.88
C.
Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a)
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.
(b)
Options
No voting rights.
-66-