appendix 4e - 2005 financial report - read here

Consolidated Minerals Limited
Appendix 4E
Preliminary final report
Rule 4.3A
Appendix 4E
Preliminary final report
Name of entity
CONSOLIDATED MINERALS LIMITED
ABN or equivalent company
reference
The information contained in this report relates to the following years:
85 000 727 926
Current year ended
30 June 2005
Previous year ended
30 June 2004
Results for announcement to the market
$A'000
Revenues from ordinary activities
Up 118% to 284,261
Profit from ordinary activities after tax attributable to
members
Up 181% to 70,327
Net profit for the period attributable to members Up 181% to 70,327
Dividends Amount per security Franked amount per
security
Financial year ended 30 June 2005
Final dividend
Interim dividend
12.00¢
6.00¢
12.00¢
6.00¢
Financial year ended 30 June 2004
Final dividend
Interim dividend
5.00¢
3.00¢
5.00¢
3.00¢
Total dividend per security (interim plus final)
Total dividends payable on all securities (interim plus final)
Current year
18.0¢
$37,814,000
Previous year
8.0¢
$13,695,188
Dividend payments
Date the final 2005 dividend is payable 7 October 2005
Record date to determine entitlements to the dividend 26 September 2005
Dividend reinvestment plan
Effective 17 March 2005, it was resolved to vary the Dividend Reinvestment Plan whereby cash
dividends are applied to purchase ordinary shares in the Company on market, free of brokerage.
Consolidated Minerals Limited
Appendix 4E
Preliminary final report
Earnings per security (EPS)
Current period
Previous
corresponding
period
Basic EPS
Diluted EPS
Diluted earnings per share is calculated after
adjusting net profit after tax for the effect of
converting potential ordinary shares, these
being options over ordinary shares in the
company.
37.3 ¢
35.6 ¢
15.7 ¢
14.8 ¢
30/06/05 30/06/04
$000 $000
RETAINED EARNINGS
Retained earnings/(accumulated losses) at the beginning of the financial year 23,028 6,814
Dividends (20,792) (8,839)
Net profit 70,327 25,053
Retained earnings at the end of the financial year
72,563
23,028
NTA backing
Current period
Previous corresponding
period
Net tangible asset backing per ordinary security
95.6 ¢ per share
49.7 ¢ per share
Control gained over entities having material effect
On 1 March 2005 Consolidated Nickel Pty Ltd; a subsidiary of Consolidated Minerals Limited, acquired 100%
of the issued share capital of Reliance Mining Limited and its controlled entities for $92,860,000. The operating
results of this newly controlled entity have been included in the consolidated statement of financial performance
since the date of acquisition.
Loss of control of entities having material effect
No control over any entities was lost during the financial year ended 30 June 2005.
Details of associates and joint venture entities
None.
Consolidated Minerals Limited
Appendix 4E
Preliminary final report
DISCUSSION AND ANALYSIS OF THE FINANCIAL STATEMENTS
The Consolidated Minerals Limited consolidated entity consists of Consolidated Minerals Limited and its
controlled entities (“consolidated entity”). The principal activities of the consolidated entity during the financial
year were the exploration, mining, processing and sale of manganese, chromite and nickel ore.
Statement of Financial Performance
Consolidated Minerals posted a record after tax profit for the 2004/05 financial year of $70.3 million,
representing a 181% increase on the previous financial year. The result included a $19.1 million after tax profit
on the sale of the Company’s 14.8% shareholding in iron ore producer, Portman Limited, which was divested
during the first half. Excluding this profit, the underlying trading profit of $51 million doubled for the third
consecutive year.
The record earnings result was achieved on a 62% increase in sales revenue to $202.4 million (2004: $124.6
million) and equated to after tax earnings per share of 37.3 cents, underpinning a 49% return on equity for the
year.
The increased sales revenue was based on steady manganese and chromite production for the year, together with
an initial modest revenue contribution from the newly acquired Kambalda nickel operations. The outstanding
financial performance reflected Consolidated’s ability to extract full value during the year from the strong levels
of demand and commodity prices for our core steel-related commodities.
Statement of Financial Position
Total assets increased by $159 million or 100% during the year. This increase was primarily due to the
successful takeover of Reliance Mining Ltd and its controlled subsidiaries (“the Reliance Group”) whereby their
assets were incorporated into the consolidated entity (Refer note 38 to the financial statements). Also
contributing was the commissioning of additional plant for expanding processing infrastructure at the Woodie
Woodie mine.
Total liabilities increased by $50 million to $119 million. This was the result of:
1) an increase in accounts payable and sundry provisions of $23 million reflecting an increase in
operating capabilities of the consolidated entity’s cash generating assets.
2) an increase in provision for tax liabilities of $12.6 million
3) an increase in interest bearing liabilities of $7.3 million
4) liabilities acquired from the takeover of the Reliance Group.
The equity attributable to shareholders increased by $109 million or 122% due primarily to:
1) $48 million equity consideration for the Reliance Group takeover;
2) an increase in retained earnings of $50 million as a result of the $70.3 million profit result net of
dividends paid of $20.8 million.
Statement of Cash Flows
Net cash inflows of $56 million from operating activities increased by 39% due to increased sales activity, net of
income taxes.
Consolidated Minerals Limited
Appendix 4E
Preliminary final report
Net cash outflows from investing activities increased by $46 million or 297% due to acquisition of the Reliance
Group, together with strategic investments in other listed companies. Plant and equipment acquisitions for
expanding operations also contributed to the result. Offsetting these was proceeds received from the sale of
shares in Portman Ltd.
Net cash outflows from financing activities increased by $19 million or 134% due mainly to additional dividends
paid.
Consolidated Minerals Limited
ABN 85 000 727 926
Annual report - 30 June 2005
Contents
- 1 -
Page
Corporate directory 2
Directors' report 3
Financial report 15
Directors' declaration 72
Independent audit report to the members 73
- 2 -
Consolidated Minerals Limited
Corporate directory
Board of Directors C L Smith - Chairman
Dip. Mining, WASM, FAusIMM
M L Kiernan - Managing Director
B.Bus.
D M Macoboy - Finance Director
B.Ec, B.Comm, CPA
A J Quadrio - Technical Director
B.App.Sc (Met), FAusIMM
R S Elman - Non-Executive Director
D N Gilham - Non-Executive Director
FAIM, FAICD
Secretary N R Greygoose
CA
Principal registered office in Australia 28 Ventnor Avenue
West Perth WA 6005
Telephone: (61 8) 9321 3633
Facsimile: (61 8) 9321 3644
E-mail: [email protected]
Web site: www.consminerals.com.au
Share registry Computershare Investor Services Pty Ltd
Level 2, 45 St George's Terrace
Perth WA 6000
Telephone: (61 8) 9323 2000
Facsimile: (61 8) 9323 2033
External auditor Ernst & Young
Internal auditor Deloitte Touche Tohmatsu
Solicitors Steinepreis Paganin
Freehills
Blakiston & Crabb
Bankers National Australia Bank Limited
HSBC Bank Australia Limited
Home Stock Exchange Australian Stock Exchange Limited
Perth, Western Australia
ASX Code: CSM
International Stock Exchanges Alternative Investment Market (AIM) of the London Stock Exchange
code: CNM
Frankfurt Stock Exchange (FSE) code: CMN
Treasury Advisor Oakvale Capital Limited
Consolidated Minerals Limited
Directors' report
(continued)
- 4 -
Consolidated Minerals Limited
Directors' report
The Directors of Consolidated Minerals Limited ("CML") have pleasure in submitting their report for the financial year
ended 30 June 2005.
Directors
The following persons were Directors of CML during the financial year and up to the date of this report. Directors were in
office for this entire period unless otherwise stated.
C L Smith - Chairman
M L Kiernan - Managing Director
D M Macoboy - Finance Director
A J Quadrio - Technical Director
R S Elman - Non-Executive Director
M Randall - Non-Executive Director (stepped down
from office on 6 April 2005)
D N Gilham - Non-Executive Director
R Skatsche-Depisch - Alternate for ML Kiernan
A Day - Alternate for RS Elman
Principal activities
The principal activities of the consolidated entity (which includes the controlled entities of CML) during the financial year
were the exploration, mining, processing and sale of manganese, chromite and nickel ore.
Results of operations
Net profit after income tax attributable to members of CML for the financial year was $70,326,705 (2004: $25,052,822).
Net assets of CML increased during the year by $108,623,000 or 122%. This was primarily the result of acquiring ASX
listed nickel producer Reliance Mining Limited on 1 March 2005 for $92.9 million. Funding of this acquisition was by way
of a $48.2 million share issue with the balance paid for in cash (refer note 38). Further details on the financial position of
the consolidated entity are available in the Statement of Financial Position.
Review of operations
CML has a strong production base in ferrous raw materials through its manganese, chromite and nickel divisions and is
developing new businesses in copper and iron ore.
Consolidated Minerals has a clear vision to continue to maintain growth and profitability and to maximise returns to
shareholders through capital growth and dividends by:
• leveraging off the strong cash flows of its steel-related businesses;
• undertaking organic growth or acquisitions where value-accretive;
• attracting high quality and experienced management and operational personnel;
• maintaining a focus on Australian, particularly Western Australian, resource projects.
The Company’s sales strategy is to broaden its international marketing efforts with the aim of achieving a balance between
two of the world’s key growth regions – China, which represents approximately 50% of CML’s business – and Eastern
Europe, which represents approximately 20%. In addition, the Company continues to expand into other markets, including
India and the Middle East, which represent the remaining 30%.
Corporate structure
CML is a company limited by shares that is incorporated and domiciled in Australia.
Options granted over unissued shares
Details of options issued and exercised during the financial year are contained in note 28 to the financial statements. Details
of options granted to Directors or relevant officers as part of their remuneration are set out in note 33. Subsequent to the end
of the financial year and up to the date of this Director's report, 1,900,000 options over ordinary shares were issued with an
average exercise price of $2.90. During this same period, 263,633 options were exercised (average exercise price of $0.86)
Consolidated Minerals Limited
Directors' report
(continued)
- 4 -
and 166,667 options (exercise price of $1.07) were cancelled. As at the date of this report, 4,695,700 options over unissued
shares remain outstanding.
Significant changes in the state of affairs
Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:
- The successful takeover of Reliance Mining Limited, thereby adding a producing nickel mine to the consolidated entity's
operations.
- Ramp up to a new 1 million tonnes per annum level of production at Woodie Woodie.
- Further exploration success expanding manganese resource inventories at Woodie Woodie (measured, indicated and
inferred) to 14.7 million tonnes and 2.1 million tonnes (measured and indicated) at 3.6% nickel at the Reliance operations.
Events subsequent to the end of the financial year
CML made a share placement to Australian based institutions of 10.2 million shares at an issue price of $4.00 per share.
Final fully franked dividends recommended subsequent to the end of the financial year of 12 cents per share or $26.1
million are payable on 7 October 2005 (refer to note 6 in the financial statements).
CML increased its stake in ASX listed copper producer; Jabiru Metals Limited to 19.9% for $7.33million.
Likely developments and expected results of operations
In the opinion of the Directors there is no information available as at the date of this report on any likely developments
which may materially affect the operations of the consolidated entity and the expected results of those operations in
subsequent years.
Consolidated Minerals Limited
Directors' report
(continued)
- 5 -
Information on Directors
Director Qualification, experience and special responsibilities
Securities beneficially held in parent
entity at date of report
Colin L Smith
Chairman
Dip. Mining, WASM, FAusIMM
Mr Smith has been a Director since August 1998. Mr
Smith is an independent minerals consultant with over 40
years experience, including extensive general management,
corporate and directorial experience in the iron ore, gold,
lead-zinc and uranium industries, primarily in Australia and
Ghana.
During the three years immediately before the end of the
financial year Mr Smith has also served as a Director of the
following listed companies:
• Monarch Resources Ltd (since March 2002); and
• Ballarat Goldfields NL (since October 2002).
1,301,392 fully paid shares
Michael L Kiernan
Managing Director
B Bus.
A Director since April 1998. Mr Kiernan has over 30 years
experience in the transport, processing and mining
contracting industries. He has been involved with all the
major manganese projects of the East Pilbara. His
experience includes gold, iron ore, nickel, barytes and tin
projects. He has held executive positions with Australia's
major transport and mining contractors.
During the three years immediately before the end of the
financial year he has also served as a Director of Monarch
Resources Ltd since March 2002.
3,110,000 fully paid shares
David M Macoboy
Finance Director
B.Ec, B.Comm, CPA
A Director since August 1998. Mr Macoboy is a certified
practising accountant with degrees in both economics and
commerce. He has extensive experience in banking,
finance and general management in a range of industries
having held senior positions in banking, investment
banking, media and mining companies.
During the three years immediately before the end of the
financial year he has also served as a Director of the
following listed companies:
• Monarch Resources Ltd (since March 2002);
• Anzoil NL (from December 2002 to November
2003); and
• Westonia Mines Ltd (from August 2003 to June
2005).
760,000 fully paid shares
Consolidated Minerals Limited
Directors' report
(continued)
- 6 -
Information on
Directors...continued
Director Qualification, experience and special responsibilities Securities beneficially held in parent
entity at date of report
Allan J Quadrio
Technical Director
B.App.Sc (Met), FAusIMM
Appointed as a Director on 23 February 2001, Mr Quadrio
has extensive experience in the mining industry, having
held senior positions with both WMC, Westgold Resources
and with CML since December 1998.
During the three years up to the end of the financial year
Mr Quadrio has also served as a Director of Mithril
Resources Ltd since December 2004.
1,098,668 fully paid shares
Richard S Elman
Non-Executive Director
Appointed on 30 July 2002, Mr Elman is the founder and
Chief Executive Officer of Hong Kong based Noble Group
Limited, the Company's major shareholder. He has had over
40 years experience in the commodities trading industry.
Mr Elman is a Director of the Noble Group of Companies
which owns 26,892,975 ordinary fully paid shares in CML.
During the past three years Mr Elman has not served on a
board of any other Australian listed company.
Nil fully paid shares
David N Gilham
Non-Executive Director
FAIM, FAICD
Appointed on 2 March 2004, Mr Gilham was Managing
Director of Bristile Ltd from its float by Futuris
Corporation Ltd in 1997 to its takeover by Brickworks Ltd
in 2003. Prior to his tenure at Bristile Ltd and Brickworks
Ltd, Mr Gilham held senior executive roles with Futuris
Corporation Ltd, Key Transport Pty Ltd (a subsidiary of
Heytesbury Holdings) and The Bell Group Ltd.
During the three years immediately before the end of the
financial year he has served as a Director of the following
listed companies:
• Brickworks Ltd (since August 2003);
• Bristile Ltd (from July 1997 to August 2003);
• Australian Wine Holdings Ltd (from December
2004);
• Integrated Tree Cropping Ltd (from March 2004 to
July 2005); and
• Forest Enterprises Australia Ltd (from September
2004 to August 2005).
500,000 fully paid shares
Consolidated Minerals Limited
Directors' report
(continued)
- 7 -
Alternate Directors
During the financial year, Alternate Directors have not received any remuneration, nor did they act in any directorial
capacity for the consolidated entity. No Alternate Director held any equity interests in CML during the year. No Alternate
Director held any directorships in other Australian listed companies during the 3 years before the end of the financial year.
Company Secretary
The Company Secretary is Mr N Greygoose CA. Mr Greygoose was appointed to the position of Company Secretary in
1999. Before joining CML he held similar positions with other companies for 6 years, and prior to that worked in a
chartered accounting practice.
Meetings of Directors
The numbers of meetings of the Company's Board of Directors and of each Board committee held during the year ended 30
June 2005, and the numbers of meetings attended by each Director were:
Board meetings Meetings of committees held and attended
Number held
Number
attended
Audit &
compliance Treasury Remuneration
C L Smith 15 15 2 * 3
M L Kiernan 15 15 * 2 *
D M Macoboy 15 14 1 2 *
A J Quadrio 15 15 * * *
R S Elman 15 8 * * *
M Randall 9 9 2 * 2
D N Gilham 15 14 1 * 3
* = Not a member of the relevant committee
At the date of this report, CML had an audit and compliance committee of the Board of Directors, which met twice during
the year. The details of the functions and memberships of the other committees of the Board are presented in the Statement
of Corporate Governance Practices.
Mr Elman was appointed to the audit committee on 23 June 2005 in replacement of D M Macoboy.
Remuneration Report
This report outlines the remuneration arrangements in place for directors and executives of Consolidated Minerals Limited.
Remuneration Philosophy
The objective of the company’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and
the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures
that executive reward satisfies the following key criteria for good reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage / alignment of executive compensation
• transparency
• capital management.
The company has structured an executive remuneration framework that is market competitive and complementary to the
performance of the organisation. This is achieved through alignment with shareholder's interests which:
• has profit as a core component of plan design
• focuses on sustained growth in share price and as well as focusing the executive on key non-financial drivers of
value
• attracts and retains high calibre executives.
Consolidated Minerals Limited
Directors' report
(continued)
- 8 -
In addition, senior executives receive performance incentives as detailed in the section headed "Performance Incentives".
Company performance
The overall level of executive reward takes into account the performance of the consolidated entity over a number of years,
with greater emphasis given to the current and prior year. Over the past 4 years, the consolidated entity's earnings per share
has grown at an average rate of 55%, and dividends paid per share has grown at an average rate of 72% per year. Reflecting
these results, the closing share price of CML at the end of the preceding 4 financial years has grown by an average of 91%
per year.
Remuneration Committee
The remuneration committee advises the Board on remuneration and incentive policies and practices generally and makes
specific recommendations in relation to compensation arrangements for the Managing Director and non executive directors
and makes recommendations to the Board in respect of all equity based remuneration plans.
Executive remuneration and other terms of employment are reviewed annually by the remuneration committee having
regard to performance, relevant comparative information and expert advice.
Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive director and senior manager
remuneration is separate and distinct.
Non-executive directors
Fees and payments to non executive Directors reflect the demands which are made on, and the responsibilities of, the
Directors. Non executive Directors’ fees and payments are reviewed annually by the Board. The Chairman’s fees are
determined independently to the fees of non executive Directors based on comparative roles in the external market. Non
executive Directors do not receive share options.
Directors’ fees
Remuneration is inclusive of committee fees. Non executive Director's fees are determined within an aggregate Directors'
fee pool limit, which is periodically recommended for approval by shareholders and which currently stands at $400,000.
Retirement allowances for Directors
In October 2001 shareholders approved a retirement scheme for Non Executive Directors of the Company. The scheme
specifies that after three years of service by a Non Executive Director, and in the event that the Director then retires, the
retiring Director will receive a benefit equal to half of the annual Non Executive Director's fee for every completed year of
service. The maximum benefit payable to the retiring Director will be an amount equal to five times the Non Executive
Director's average annual fee over the previous two years.
Senior management and executive director remuneration
The remuneration committee makes specific recommendations on remuneration packages and other terms of employment
for Executive Directors and senior management. The Company's remuneration policy for Executive Directors and senior
management is designed to promote superior performance and long term commitment to the Company.
The executive pay and reward framework consists of the following components:
• base pay and benefits
• performance incentives, and
• other remuneration such as superannuation.
The combination of these comprises the executive’s total remuneration.
Base pay
Structured as a total employment cost package which may be delivered as a mix of cash and prescribed non-financial
benefits at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior
executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also
reviewed on promotion.
Consolidated Minerals Limited
Directors' report
(continued)
- 9 -
There are no guaranteed base pay increases fixed in any senior executives’ contracts.
Retirement benefits
The consolidated entity makes superannuation contributions in compliance with the Superannuation Guarantee legislation.
Superannuation contributions are made to complying funds nominated by each employee.
Performance incentives
Executive Directors and senior management receive a performance based remuneration which is met out of a profit sharing
pool on a financial year basis.
For the financial year ended 30 June 2005 the profit sharing pool was calculated as a proportion of after tax profit that
exceeded a predetermined rate of return on shareholders' funds. The targeted rate of return for the calendar year was 12.5%
p.a. on shareholders' funds. All payments from the profit sharing pool to Executive Directors and senior management are
capped at 100% of base salary.
The whole of the profit sharing provision for the financial year ended 30 June 2005 was charged against earnings in the
current financial year. The targeted rate of return on shareholders' funds is reviewed periodically. Subject to appropriate
expert external advice, changes are recommended to the remuneration committee and then to the full Board. Overall
remuneration policies are subject to the discretion of the Board and can be changed to reflect competitive market and
business conditions where it is in the interests of the Company and shareholders to do so.
Details of the nature and amount of each element of the emoluments of each Director of CML and each of the officers of
CML and the consolidated entity receiving the highest emoluments are as follows:
Directors of Consolidated Minerals Limited
Remuneration CL Smith ML Kiernan DM
Macoboy
AJ Quadrio RS Elman M Randall
(a)
DN Gilham Total
Primary
Salary & directors fees 104,110 541,356 - 286,349 - 54,336 53,201 1,039,352
Consulting fees 134,075 - 368,950 - - 6,750 - 509,775
Profit sharing bonus -
2004
-
252,500
193,500
128,216
-
-
-
574,216
Profit sharing bonus -
2005
-
580,750
370,500
300,000
-
-
-
1,251,250
Non-monetary benefits (b) 3,690 157,907 33,326 4,612 - - - 199,535
Post-employment
Superannuation 9,370 24,000 - 25,771 - 4,890 4,788 68,819
Retirement benefits
provided for/paid
61,313
-
-
-
-
-
34,761
96,074
Other
Insurance 7,719 7,719 7,719 7,719 7,719 7,719 7,719 54,033
Total 320,277 1,564,232 973,995 752,667 7,719 73,695 100,469 3,793,054
Less Profit sharing bonus-
2004 (c)
-
252,500
193,500
128,216
-
-
-
574,216
Remuneration - 2005
financial year
320,277
1,311,732
780,495
624,451
7,719
73,695
100,469
3,218,838
Subject to obtaining shareholder approval at the 2005 Annual General Meeting, the Company will issue to Mr Kiernan
760,000 ordinary fully paid shares as an incentive to enter into a 5 year contract, together with 760,000 ordinary fully paid
shares per year over a 5 year period on meeting a performance hurdle of achieving a net profit after tax figure derived from
the Company's annual budget. Shares issued will not be able to be sold by Mr Kiernan until after the expiry of the Contract.
No amount has been included in the disclosure of Director's remuneration in the above table as the shares have not been
granted at 30 June 2005. The company policy pursuant to accounting standard AASB 1046 Director and Executive
Disclosures by Disclosing Entities is to recognise the value of share based compensation between the grant date and the
vesting date which will not necessarily be reflective of the service period.
(a) Malcolm Randall stepped down from the position of Director on 6 April 2005.
Consolidated Minerals Limited
Directors' report
(continued)
- 10 -
(b) Non-monetary benefits include interest benefit on Directors' loans (note 33), and sundry fringe benefits.
(c) During the year, the method of calculation for the profit sharing bonus was changed from a calendar to financial year
basis. As a result, the bonus relating to the six months ended 30 June 2004 is included in the current financial year.
The same individuals who acted in their capacity as Director of the parent entity also acted in their capacity as a Director
for the consolidated entity.
Specified executives of the consolidated entity
Remuneration R Baxter
(General
Manager -
Group
Services) (a)
I Huitson
(Chief
Mining
Engineer)
E Rothery
(Chief
Geologist)
N Greygoose
(General
Manager
Finance &
Administrati
on
M Walters
(General
Manager
Marketing)
Total
Primary
Salary & fees 167,466 202,369 193,961 199,03 255,781 1,018,610
Profit sharing bonus - 2004 - 104,426 78,319 96,96 124,317 404,029
Profit sharing bonus - 2005 111,781 210,000 203,493 221,17 272,979 1,019,431
Non-monetary benefits 3,130 - - 7,918 11,048
Post-employment
Superannuation 15,072 18,213 17,456 17,91 23,020 91,674
Equity
Options (c) 129,606 - - - 129,606
Total 427,055 535,008 493,229 535,09 684,015 2,674,398
Less Profit sharing bonus - 2004 (d) - 104,426 78,319 96,96 124,317 404,029
Remuneration - 2005 financial year 427,055 430,582 414,910 438,12 559,698 2,270,369
Specified executives of the parent entity
Remuneration R Baxter
(General
Manager -
Group
Services) (a)
I Huitson
(Chief
Mining
Engineer)
B Cousins
(General
Manager
Logistics) (b)
N Greygoose
(General
Manager
Finance &
Administrati
on
M Walters
(General
Manager
Marketing)
Total
Primary
Salary & fees 167,466 202,369 121,736 199,03 255,781 946,385
Profit sharing bonus - 2004 - 104,426 - 96,96 124,317 325,710
Profit sharing bonus - 2005 111,781 210,000 - 221,17 272,979 815,938
Non-monetary benefits 3,130 - 12,559 7,918 23,607
Post-employment
Superannuation 15,072 18,213 10,956 17,91 23,020 85,174
Equity
Options (c) 129,606 - 3,512 - 133,118
Total 427,055 535,008 148,763 535,09 684,015 2,329,932
Less Profit sharing bonus - 2004 (d) - 104,426 - 96,96 124,317 325,710
Remuneration - 2005 financial year 427,055 430,582 148,763 438,12 559,698 2,004,222
(a) Rodney Baxter was appointed on 15 February 2005.
(b) Blake Cousins was appointed on 9 August 2004.
(c) The fair value of each option has been measured using the Black-Scholes option pricing model. For the current year, the
model assumes a volatility of 28% (2004: 22%) and a risk-free interest rate of 5.63% (2004: 4.63%). Refer note 37(d)
for further details in relation to these options over unissued shares.
(d) During the year, the method of calculation for the profit sharing bonus was changed from a calendar to financial year
basis. As a result, the expense for the six months ended 30 June 2004 is included in the current financial year.
Consolidated Minerals Limited
Directors' report
(continued)
- 11 -
Service agreements
Terms of employment for the executive Directors are formalised in service agreements. Provisions of the agreements
relating to duration and termination are set out below:
M L Kiernan, Managing Director
• Term of agreement - 5 years commencing 1 July 2004.
• The agreement may be terminated by either Mr Kiernan giving the company 12 months written notice, or
alternatively the Company providing 24 months written notice.
• Payment of termination benefit on early termination by employer, other than for gross misconduct, is
equal to two times base salary.
D M Macoboy, Finance Director
• Term of agreement - 3 years commencing 1 July 2003.
• No notice period is required to be given by either parties to the agreement.
• Payment of termination benefit on early termination by employer, other than for gross misconduct, is
equal to two times base salary.
A J Quadrio, Technical Director
• Term of agreement - no fixed term.
• The agreement may be terminated by either Mr Quadrio giving the company 6 months written notice, or
alternatively the Company providing 12 months written notice.
• Payment of termination benefit on early termination by employer, other than for gross misconduct, is
equal to one year's base salary.
Share-based compensation
Options over ordinary shares
Senior executives may be offered options at a 10% discount to the prevailing market price as an incentive to commence
employment with CML. These options are issued outside of the employee share plan as detailed in note 37.
Additonal information relating to options issued to senior executives of the consolidated entity is set out below:
• Mr R Baxter received during the year options which comprised 30% of the value of his remuneration. The value of
these options at grant date as calculated in accordance with AASB 1046 Director and Executive Disclosures by
Disclosing Entities was $375,748.
Information relating to options issued to senior executives of the parent entity is also detailed below:
• Mr B Cousins received during the year options which comprised 2% of the value of his remuneration. The value of
these options at grant date as calculated in accordance with AASB 1046 Director and Executive Disclosures by
Disclosing Entities was $10,085.
Loans to Directors and executives
Information on loans to Directors and executives, including amounts, interest rates and repayment terms are set out in note
33 to the financial statements.
Consolidated Minerals Limited
Directors' report
(continued)
- 12 -
Indemnification and Insurance of Directors and Executives
Indemnity agreements have been entered into between CML and each of the Directors and officers of CML. Under the
agreements, CML has agreed to indemnify those officers, to the extent permitted under the Corporations Act 2001, against
any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities as
officers of entities in the consolidated entity. There is no monetary limit to the extent of this indemnity.
CML paid an insurance premium of $54,033 (2004: $48,286) in respect of a contract insuring each of the Directors of CML
named earlier in this report and each full-time executive officer and secretary of Australian group entities, against all
liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by the
Corporations Act 2001.
Non-audit services
Non-audit services provided by the company's external auditor comprise $76,522 for tax compliance services and $281,235
for accounting and due diligence services. Further details of remuneration of auditors are set out in note 34. The directors
are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor
independence was not compromised.
Auditor's Independence Declaration
A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 14.
Consolidated Minerals Limited
Directors' report
(continued)
- 13 -
Environmental regulation
The consolidated entity is subject to environmental regulation in respect to its manganese, chromite and nickel exploration
and mining activities. These obligations are regulated under both Australian state and federal law. The consolidated entity
has developed a project management plan in relation to its manganese and chromite operations, which has been approved
by relevant government authorities.
Compliance with environmental obligations is monitored by the audit and compliance committee. No environmental
breaches have been notified by any government agency during the year ended 30 June 2005.
Rounding of amounts
The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments
Commission, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report have been
rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of CML support
and have regard to the principles of corporate governance. The Company's corporate governance statement is contained in
the additional ASX information section of this annual report.
Michael Kiernan - Managing Director
Perth, Western Australia
12 September 2005

Consolidated Minerals Limited
Financial report
30 June 2005
- 15 -
Contents
Page
Financial report 15
Statements of financial position 16
Statements of financial performance 17
Statements of cash flows 18
Notes to the financial statements 19
Directors' declaration 72
Independent audit report to the members 73
Consolidated Minerals Limited
Statements of financial position
As at 30 June 2005
- 16 -
Consolidated Parent entity
Notes 2005 2004 2005 2004
$'000 $'000 $'000 $'000
Current assets
Cash assets 7,31 31,796 42,617 9,036 34,054
Receivables 8,31 30,385 31,074 292 4,179
Inventories 9 30,848 11,985 - -
Other financial assets 10 1,191 3,216 785 3,216
Other assets 11 13,569 9,395 646 324
Total current assets 107,789 98,287 10,759 41,773
Non-current assets
Receivables 12,31 2,498 485 147,584 38,636
Other financial assets 13,31 14,409 5,227 3,918 6,055
Property, plant and equipment 14 42,694 15,884 1,300 452
Mineral interests 15 119,013 22,062 18 -
Deferred tax assets 16 8,266 3,137 2,016 2,992
Other assets 17 21,667 12,534 83 30
Total non-current assets 208,547 59,329 154,919 48,165
Total assets 316,336 157,616 165,678 89,938
Current liabilities
Payables 18,31 35,465 16,096 960 967
Interest bearing liabilities - stockpile funding 19,31 14,671 13,027 - -
Interest bearing liabilities - other 20,31 10,716 9,481 12 7,951
Provisions 21 4,386 1,175 3,102 217
Current tax liabilities 22 15,766 7,187 15,766 7,187
Other liabilities 23 12,003 8,378 - -
Total current liabilities 93,007 55,344 19,840 16,322
Non-current liabilities
Interest bearing liabilities 24,31 8,760 2,706 35 -
Deferred tax liabilities 25 10,714 6,686 8,751 6,383
Provisions 26 1,516 911 566 117
Other liabilities 27 4,644 2,897 - -
Total non-current liabilities 25,634 13,200 9,352 6,500
Total liabilities 118,641 68,544 29,192 22,822
Net assets 197,695 89,072 136,486 67,116
Equity
Parent entity interest
Contributed equity 28 128,852 69,765 128,852 69,765
Reserves 29(a) (4,010) (4,010) (4,010) (4,010)
Retained profits 29(b) 72,563 23,028 11,644 1,361
Total parent entity interest 197,405 88,783 136,486 67,116
Outside equity interest in controlled entities 30 290 289 - -
Total equity 197,695 89,072 136,486 67,116
The above Statement of financial position should be read in conjunction with the accompanying notes.
Consolidated Minerals Limited
Statements of financial performance
for the year ended 30 June 2005
- 17 -
Consolidated Parent entity
Notes 2005 2004 2005 2004
$'000 $'000 $'000 $'000
Revenue from ordinary activities
Sales revenue 202,425 124,576 - -
Other revenues from ordinary activities 81,836 5,923 99,298 33,990
3 284,261 130,499 99,298 33,990
Expenses from ordinary activities
Cost of sales (112,737) (75,674) - -
Other expenses from ordinary activities:
Marketing expenses (1,154) (997) (1,106) (967)
Occupancy expenses (532) (311) (484) (311)
Human resources expenses (8,257) (4,005) (7,213) (3,520)
Tenement administration expense (1,315) (892) - -
Carrying value of assets sold (53,194) (4,552) (51,595) (1,640)
Capitalised costs written off (706) (4,812) (65) (1,180)
Other expenses (5,139) (2,044) (5,128) (3,960)
Borrowing expenses 4 (2,593) (2,668) (983) (1,488)
Profit from ordinary activities before income tax
expense 98,634 34,544 32,724 20,924
Income tax expense 5 (28,307) (9,203) (1,649) 3,218
Profit from ordinary activities after income tax
expense
70,327 25,341 31,075 24,142
Net profit
70,327 25,341 31,075 24,142
Net profit attributable to outside equity interest 30 - (288) - -
Net profit attributable to members of
Consolidated Minerals Limited 70,327 25,053 31,075 24,142
Share issue costs 28 - (1,261) - (1,261)
Total expenses attributable to members of
Consolidated Minerals Limited recognised
directly in equity - (1,261) - (1,261)
Total changes in equity attributable to members
of Consolidated Minerals Limited other than
those resulting from transactions with owners as
owners 70,327 23,792 31,075 22,881
Basic earnings per share 43
Cents
37.3
Cents
15.7
Diluted earnings per share 43 35.9 14.8
The above Statement of financial performance should be read in conjunction with the accompanying notes.
Consolidated Minerals Limited
Statements of cash flows
for the year ended 30 June 2005
- 18 -
Consolidated Parent entity
Notes 2005 2004 2005 2004
$'000 $'000 $'000 $'000
Cash flows from operating activities
Receipts from customers 220,184 120,815 - -
Payments to suppliers and employees (154,035) (83,889) (10,944) (6,851)
Dividends received 1,168 2 1,168 2
Interest received 1,291 535 1,041 277
GST received 12,014 6,650 - -
Interest paid (2,238) (2,399) (818) (1,258)
Net income taxes paid (15,482) (1,280) (15,482) (1,280)
Net cash inflow (outflow) from operating
activities 41 62,902 40,434 (25,035) (9,110)
Cash flows from investing activities
Payment for mineral exploration & evaluation
expenditure (15,274) (5,298) (124) (886)
Refund/(payment for) for road sealing 65 (1,335) - -
Payments for property, plant and equipment (17,769) (3,311) (1,010) (82)
Payments for investments (59,324) (9,811) (47,192) (9,811)
Payments for development expenditure (1,294) (324) - -
Payment for acquisition of controlled entity 38 (39,291) - - -
Proceeds from sale of property, plant and
equipment 718 2,513 - -
Proceeds from sale of investments 78,016 1,956 77,485 1,956
Proceeds from sale of tenements 500 - - -
(Payment for)/refunds of security deposits (4) - - -
Net cash inflow (outflow) from investing
activities (53,657) (15,610) 29,159 (8,823)
Cash flows from financing activities
Proceeds from issues of shares and options 28 1,419 26,531 1,419 26,530
Share issue costs 28 - (1,261) - (1,261)
Proceeds from stockpile funding 101,362 79,624 - -
Repayment of stockpile funding (102,550) (78,458) - -
Buy back of shares (383) - (383) -
Repayment of hedge liabilities (6,900) - - -
Dividends paid 6,42 (18,541) (6,810) (18,541) (6,810)
Proceeds from borrowings 4,306 162 - -
Repayment of borrowings - (5,305) (106) (1,652)
(Advance)/repayment by controlled entities - - (12,794) 35,298
Issue of Director's loan (2,000) (400) (2,000) (400)
Proceeds from repayment of Director's loans 3,338 258 3,338 258
Issue of employee loans (75) (65) (75) (65)
Net cash inflow (outflow) from financing
activities (20,024) 14,276 (29,142) 51,898
Net increase (decrease) in cash held (10,779) 39,100 (25,018) 33,965
Cash at the beginning of the financial year 42,617 3,502 34,054 88
Effects of exchange rate changes on cash (42) 15 - 1
Cash at the end of the financial year 7 31,796 42,617 9,036 34,054
The above Statement of cash flows should be read in conjunction with the accompanying notes.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
- 19 -
Note 1. Summary of significant accounting policies
BASIS OF PREPARATION OF THE FINANCIAL REPORT
The financial statements have been prepared as a general purpose financial report, which complies with the requirements of
the Corporations Act 2001, Australian Accounting Standards and Urgent Issues Consensus Views. The financial statements
have been prepared in accordance with the historical cost convention. Accounting policies adopted are consistent with those
applied in the previous financial year, except where otherwise stated.
(a) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by
Consolidated Minerals Limited ("company" or "parent entity") as at 30 June 2005 and the results of all controlled
entities for the year then ended. Consolidated Minerals Limited and its controlled entities together are referred to
in this financial report as the consolidated entity. The effects of all transactions between entities in the
consolidated entity are eliminated in full. Outside equity interests in the results and equity of controlled entities are
shown separately in the consolidated statement of financial performance and statement of financial position
respectively.
Where control of an entity is obtained during a financial year, its results are included in the consolidated statement
of financial performance from the date on which control commences. Where control of an entity ceases during a
financial year its results are included for that part of the year during which control existed.
(b) Inventories
Inventories of broken ore, concentrate, work in process and finished product (note 9) are physically measured or
estimated and valued at the lower of cost and net realisable value.
Cost comprises direct material, labour and transportation expenditure in getting such inventories to their existing
location and condition, together with an appropriate portion of fixed and variable overhead expenditure, based on
weighted average costs incurred during the period in which such inventories were produced. Net realisable value
is the amount to be obtained from the sale of the item of inventory in the normal course of business, less any
anticipated selling costs to be incurred prior to its sale.
Inventories of consumable supplies and spare parts expected to be used in production are valued at weighted
average cost. Obsolete or damaged inventories of such items are valued at net realisable value. A regular and
ongoing review is undertaken to establish the extent of surplus items and a provision is made for any potential loss
on their disposal.
(c) Investments
Investments classified as current assets represent securities in quoted companies purchased for resale and are
valued at the lower of cost and net realisable value as at balance date.
Investments classified as non-current assets represent securities in quoted and unquoted companies acquired as
investments and are shown at cost except where in the opinion of the Directors there has been a permanent
diminution in value, in which case the investments are written down to their recoverable amount.
Investments in associates are carried at the lower of the equity-accounted amount and recoverable amount in the
consolidated financial report.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 1. Summary of significant accounting policies (continued)
- 20 -
(d) Deferred expenditure
Exploration and evaluation expenditure
Exploration and evaluation expenditure is accumulated separately for each area of interest and is capitalised on the
following basis:
(a) each area of interest is considered separately when deciding whether and to what extent to carry forward or
write off exploration and evaluation costs.
(b) exploration and evaluation costs related to an area of interest are carried forward provided that rights to tenure
of the area of interest are current and provided further that one of the following conditions are met:
- such costs are expected to be recouped through successful development and exploitation of the area of
interest, or alternatively by its sale, or
- exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a
reasonable assessment of the existence or otherwise of economically recoverable reserves and active and
significant operations in relation to the area are continuing.
(c) the carrying value of mine properties (representing an accumulation of acquisition, exploration, evaluation
and development expenditure) is amortised on the basis of the remaining production output estimates taking
into account an assessment of economic mine life. Amortisation is not charged until production commences.
Unamortised expenditure relating to an area of interest is written off in the period that abandonment is
decided.
Overburden Removal
The costs associated with removing overburden from mine pits in advance of ore are deferred and charged against
earnings on a unit of ore production basis using total estimated recoverable ore reserves for each mine pit.
Capitalised Underground Decline Development Costs
Development costs associated with obtaining primary access to underground mineral resources are deferred and
charged against earnings on a unit-of-production basis using total estimated recoverable ore reserves for each
underground mine.
Road Sealing
Costs associated with the upgrading and sealing of the Ripon Hills and the Coobina mine roads are capitalised and
charged against earnings on a unit of ore production basis using total estimated recoverable ore reserves.
Loan Establishment Costs
Loan establishment costs (note 11) are deferred and amortised over the term of the loan to which the costs relate.
(e) Leased assets
Leases are classified at their inception as either operating or finance leases based on the economic substance of the
agreement so as to reflect the risks and benefits incidental to ownership. Assets of the consolidated entity acquired
under finance leases are capitalised. The initial amount of the leased asset and corresponding lease liability are
recorded at the present value of minimum lease payments. Finance leased assets are amortised over the life of the
relevant lease or, where it is likely the consolidated entity will obtain ownership of the asset on expiration of the
lease, the expected useful life of the asset. Lease liabilities are reduced by the principal component of lease
payments. The interest component is charged against profit from ordinary activities.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 1. Summary of significant accounting policies (continued)
- 21 -
(f) Recoverable amount of non-current assets
Where the carrying value of non-current assets, is greater than their recoverable amount, the assets are written
down to their recoverable amount. The Directors periodically review the carrying values of non-current assets.
The expected net cash flows are determined using after tax net cash flows discounted at 11% per annum to their
present values.
(g) Payables
Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the consolidated entity.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised
as an expense on an accrual basis.
Deferred cash settlements are recognised at the present value of the outstanding consideration payable on the
acquisition of an asset discounted at prevailing commercial borrowing rates.
(h) Restoration & rehabilitation
Provision is made for the anticipated costs of restoration, rehabilitation, plant removal and plant closure resulting
from disturbance from exploration, evaluation, development and production activities. The amount of provision is
based on undiscounted current costs and is recognised on a gradual basis over the life of the disturbed areas as
production occurs. The costs are allocated to the respective phases of operations. Estimates of future costs are
assessed at least on a six monthly basis.
(i) Other provisions
Provisions are recognised when the consolidated entity has a legal, equitable or constructive obligation to make a
future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is
probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the
amount of the obligation.
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly
recommended on or before balance date.
(j) Cash
For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash
on hand and which are used in the cash management function on a day to day basis, net of outstanding bank
overdrafts.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 1. Summary of significant accounting policies (continued)
- 22 -
(k) Income tax
Tax effect accounting procedures are followed whereby the income tax expense in the statements of financial
performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit
relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income
tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit
accounts at the rates which are expected to apply when those timing differences reverse.
The benefit arising from estimated carry forward losses is recorded as a future income tax benefit where realisation
of such benefit is considered to be virtually certain.
As a result of the parent entity and its 100% owned subsidiaries forming a tax consolidated group, members of the
group have formed a tax sharing arrangement in order to allocate income tax expense to the wholly owned
subsidiaries on a pro-rata basis.
(l) Borrowing costs
Borrowing costs are expensed as incurred except where they relate to the financing of projects under construction
where they are capitalised up to the date of commissioning or sale.
(m) Depreciation
Property, plant and equipment other than freehold land are depreciated over their useful economic lives as follows:
2004 & 2005 Rate Method
Office furniture & equipment (owned
and leased) 33.0% Diminishing value
Motor vehicles (owned & leased) 22.5% Diminishing value
Mining plant & equipment (owned)
-
On a units of production basis,
taking into account an assessment
of economic life.
Mining plant & equipment (leased)
-
Shorter of lease period or units of
production basis
(n) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated
entity and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
(i) Sale of goods
Sales are recognised when property passes to the purchaser, or physical control over the product passes
pursuant to an enforceable sales contract, and selling prices are known or can be reasonably estimated.
Variations in sales proceeds are recognised in the period that adjustments become known.
(ii) Interest
Control of the right to receive the interest payment.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 1. Summary of significant accounting policies (continued)
- 23 -
(o) Foreign currency transactions
Foreign currency transactions are initially translated into Australian currency at the rate of exchange at the date of
the transaction. At balance date amounts payable or receivable which are denominated in foreign currencies are
translated into Australian currency at the rates of exchange on that date. Exchange differences relating to monetary
items are included in the Statement of Financial Performance as exchange gains or losses in the period when the
exchange rates change, except where the exchange difference relates to a transaction intended to specifically hedge
the purchase or sale of goods or services, in which case the exchange difference is deferred and included in the
measurement of the purchase or sale.
Specific hedges
Where a purchase or sale is specifically hedged, exchange gains or losses on the hedging transaction arising up to
the date of purchase or sale and cost, premiums and discounts relative to the hedging transaction are deferred and
included in the measurement of the purchase or sale. Exchange gains and losses arising on the hedge transaction
after that date are taken to the statement of financial performance.
(p) Earnings per share
(i) Basic earnings per share
Basic earnings per share is determined by dividing the net profit after income tax attributable to members
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.
(q) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
- where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
- receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are
classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 1. Summary of significant accounting policies (continued)
- 24 -
(r) Financial instruments
Financial Instruments included in Equity
Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the
shareholders. This is recognised at the fair value of the consideration received.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the
share proceeds received.
Financial Instruments included in Liabilities
Convertible notes, stockpile funding facility loans and other loans payable are recorded as liabilities and are
recognised when issued at the principal amount. Interest is recognised as an expense in the period to which it
relates.
Loan establishment costs are capitalised and amortised over the term of the loan to which the costs relate.
Financial Instruments included in Assets
Trade debtors are initially recorded at the amount of contracted sales proceeds.
Dividend revenue is recognised when dividends are declared by the investee. Purchases and sales of investments
are recognised on the trade date.
Derivatives
Forward currency exchange contracts and foreign currency options are initially recognised as either an asset or
liability, at an amount equal to the option premium paid or received and the premium or discount on the forward
currency exchange contracts. Forward commodity exchange contracts are also initially recognised as either an
asset or liability. These assets and liabilities are subsequently re-measured by reference to exchange rates and
commodity pricing prevailing at balance date. The gain or loss on re-measurement is brought to account in the
Statement of Financial Performance unless the contracts are entered to hedge anticipated future transactions, in
which case the gain or loss is deferred and included in the initial measurement of the items being hedged.
The premium or discount on the forward exchange contracts and options are amortised over the period of the
contracts, unless the contracts are entered to hedge anticipated future transactions, in which case the premium or
discount is included in the initial measurement of anticipated items being hedged.
Where a hedge transaction is terminated early and the anticipated transaction is still expected to occur, the deferred
gains and losses that arose on the hedge instrument prior to its termination continue to be deferred and are included
in the measurement of the purchase or sale when it occurs. Where a hedge transaction is terminated early because
the anticipated transaction is no longer expected to occur deferred gains and losses that arose on the hedge prior to
its termination are included in the Statement of Financial Performance for the period.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 1. Summary of significant accounting policies (continued)
- 25 -
(s) Executive Directors' and officers' remuneration
Executive directors and officers receive a base remuneration that is market related, together with performance
based remuneration that is met out of a profit sharing pool. The profit sharing pool was calculated for the financial
year ended 30 June 2005 as a proportion of after-tax profit that exceeded a predetermined rate of return on
shareholders' funds. An accrual for remuneration payable out of a profit sharing pool will be recognised in current
payables when there is no realistic alternative but to settle the liability and at least one of the following conditions
is met:
• there are formal terms in the plan for determining the amount of the benefit,
• the amounts to be paid are determined before the time of completion of the financial report, or
• past practice gives clear evidence of the amount of the obligation.
Liabilities for profit sharing and bonus plans are expected to be settled within 12 months and are measured at the
amounts expected to be paid when they are settled.
(t) 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 current 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 non-accumulating 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 within 12 months of the reporting date is
recognised in the current provision for employee benefits and is measured in accordance with (i) above.
The liability for long service leave expected to be settled more than 12 months from the reporting date is
recognised in the non current 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. 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) Employee benefit on-costs
Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit
liabilities and costs when the employee benefits to which they relate are recognised as liabilities.
(iv) Equity-based compensation benefits
Equity-based compensation benefits are provided to employees via the Consolidated Minerals Limited
Employee Option Plan. The value of these equity based compensation benefits are not recognised as an
employee benefits expense. Information relating to this plan is set out in note 37.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 26 -
Note 2. Segment information
The consolidated entity operates predominantly in one business and geographical segment, being the production of ferrous
raw materials within Australia.
Note 3. Revenue
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Revenue from operating activities
Ore sales - FOB 157,071 106,232 - -
Ore sales - FCA 31,838 18,344 - -
Ore sales - other 13,516 - - -
202,425 124,576 - -
Revenue from outside the operating activities
Interest received 1,443 728 1,193 477
Dividends from controlled entity - - 20,000 31,000
Other dividends received 1,168 2 1,168 2
Sundry revenue 559 155 7 -
Proceeds from sale of plant & equipment 705 2,527 - -
Proceeds from sale of investments 77,461 2,511 76,930 2,511
Proceeds from sale of tenements 500 - - -
81,836 5,923 99,298 33,990
Revenue from ordinary activities 284,261 130,499 99,298 33,990
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 27 -
Note 4. Profit from ordinary activities
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
(a) Net gains and expenses
Net (gain)/loss on disposal of
- Investments (25,370) 871 (25,363) 871
- Property, plant and equipment 114 (385) (28) -
Other non-current assets (12) - - -
Depreciation
Property, plant and equipment 4,974 4,100 193 179
Amortisation
Road sealing costs 246 338 - -
Plant & equipment under finance lease 88 93 - 2
Mineral interests 6,033 4,323 - -
Total amortisation 6,367 4,754 - 2
Borrowing costs
Interest paid - convertible notes 670 996 670 996
Finance lease charges 807 668 - -
Interest paid - other corporations 761 735 148 262
Amortisation of loan establishment costs 355 269 165 230
Total borrowing costs 2,593 2,668 983 1,488
Other expense items:
Foreign currency exchange fluctuation (gain)/loss 34 (51) 25 (4)
Government royalties on manganese and chromite
production 8,581 5,495 - -
Minimum operating lease rentals 4,457 1,240 444 286
Write-off of loans to controlled entities - - - 894
Provision for diminution in value of investments in
other corporations 97 20 30 20
Provision for employee entitlements 719 204 276 100
Provision for/ (reversal of) rehabilitation (259) 661 - -
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 28 -
Note 5. Income tax
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Income tax expense/(benefit)
The income tax expense for the financial year differs
from the amount calculated on profit from ordinary
activities. The differences are reconciled as follows:
Profit from ordinary activities before income tax
expense 98,634 34,544 32,724 20,924
Income tax calculated @ 30% 29,590 10,363 9,817 6,277
Tax effect of permanent differences
Non-deductible expenses/(non-assessable revenue) 803 49 (45) 13
Non-assessable dividend from controlled entity - - (6,000) (9,300)
Franking credits on dividends received (350) - (350) -
Utilisation of capital losses not previously brought to
account (1,695) - (1,695) -
Transfer of net tax effect balances to subsidiaries - - - (174)
Over provision in prior year (41) (76) (78) (34)
Recognition of future income tax benefit arising from
tax losses due to utilisation being virtually certain - (1,133) - -
Income tax expense/(benefit) attributable to profit
from ordinary activities 28,307 9,203 1,649 (3,218)
Tax consolidation
Effective 1 July 2002, for the purposes of income taxation, CML and its 100% subsidiaries formed a tax consolidated
group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the
wholly-owned subsidiaries on the basis of each controlled entity's notional stand alone tax position. In addition, the
agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its
payment obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group
is Consolidated Minerals Limited.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 29 -
Note 6. Dividends
Parent entity
2005 2004
$'000 $'000
Ordinary shares
Dividends paid during the year:
- current year interim dividend (6 cents per share franked) (2004: 3 cents per share
franked) 11,753 4,656
- previous year final dividend (5 cents per share franked) (2004: 2.75 cents per share
franked) 9,039 4,183
20,792 8,839
Dividends not recognised at year end
In addition to the above dividends, since year end the Directors have recommended the
payment of a fully franked final dividend of 12 cents per fully paid ordinary share (2004: 5
cents per share fully franked). The proposed dividend is expected to be paid on 7 October
2005 and has not been recognised as a liability at year end in line with the accounting
policy set out in note 1. 26,062 8,975
Franked dividends
The franked portions of the dividends recommended after 30 June 2005 will be franked out
of existing franking credits or out of franking credits arising from the payment of income
tax in the year ending 30 June 2006.
Franking credits available for subsequent financial years based on a tax rate of 30% (2004
- 30%) 16,597 3,270
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of the current tax liability
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and
(d) franking credits that may be prevented from being distributed in subsequent financial years.
Note 7. Cash assets
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Cash at bank and on hand 31,796 42,617 9,036 34,054
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 30 -
Note 8. Receivables (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Trade debtors - other corporations (a) 26,655 25,748 4 2
Sundry debtors - other corporations 3,642 1,736 200 587
Amount owing by Directors (note 33) 88 3,590 88 3,590
30,385 31,074 292 4,179
(a) Trade debtors subject to credit insurance were $22,085,000 (2004: $18,068,000).
Trade debtors are pledged as security for the consolidated entity's stockpile financing facility (note 19). They are
non-interest bearing and are generally on 30 day terms.
Note 9. Inventories (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Finished goods - at cost 4,656 3,553 - -
Ore stockpiles - at cost 23,950 7,084 - -
Consumables - at cost 2,242 1,348 - -
30,848 11,985 - -
Finished goods are pledged as security for the consolidated entity's stockpile financing facility (note 19).
Note 10. Other financial assets (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Investments - cost
Shares in other corporations
- quoted on prescribed stock exchange 1,392 3,319 919 3,319
Less: Provision for diminution (201) (103) (134) (103)
1,191 3,216 785 3,216
The market value of shares quoted on a prescribed stock exchange at 30 June 2005 was $1,307,000 (2004:
$3,216,000).
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 31 -
Note 11. Other assets (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Prepayments 1,085 332 584 196
Deferred commodity hedge loss 464 - - -
Deferred foreign exchange premiums - 557 - -
Loan establishment costs 158 128 62 128
Hedge contract receivable 11,539 8,378 - -
Receivable on undesignated foreign exchange contracts
(a) 323 - - -
13,569 9,395 646 324
(a) This amount represents the net gain on foreign exchange contracts no longer expected to hedge the underlying
exposure.
Note 12. Receivables (non-current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Unsecured loans - wholly owned controlled entities (a) - - 145,108 38,168
Security deposits 25 20 3 3
Employee loans 140 65 140 65
Amount owing from Directors 2,333 400 2,333 400
2,498 485 147,584 38,636
(a) Unsecured loans to controlled entities are interest free and have no fixed terms of repayment (note 32). A deed of cross
guarantee is in effect (note 39).
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 32 -
Note 13. Other financial assets (non-current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Shares in controlled entities - at cost (note 38) - - 1,428 2,778
Less provision for diminution - - (600) (1,950)
Shares in other corporations - at cost * 14,409 5,227 3,090 5,227
14,409 5,227 3,918 6,055
* Included in shares in other corporations at cost are the following material investments:
• CML owns a 19.7% stake in Mithril Resources Limited. Its principal activity is the exploration of nickel. The carrying
amount of CML's investment is $2,798,111 (2004: $2,150,814).
• CML owns a 17.6% stake in Reed Resources Limited. Its principal activity is the exploration of iron ore, titanium and
gold. The carrying amount of CML's investment is $3,089,945 (2004: $3,075,744).
• CML owns a 5% stake in Austminex Limited. Its principal activity is the exploration of nickel. The carrying amount of
CML's investment is $1,378,748 (2004: $nil).
• CML owns a 19.9% stake in Titan Resources Limited. Its principal activity is the exploration of nickel. The carrying
amount of CML's investment is $5,842,521 (2004: $1,901,398).
• The market value of these investments based on the last sale price as per the Australian Stock Exchange on 30 June
2005 was $10,713,350.
Note 14. Property, plant & equipment
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Plant and equipment
Plant & equipment
At cost 38,501 13,656 1,943 852
Less: Accumulated depreciation (8,233) (5,344) (690) (414)
30,268 8,312 1,253 438
Plant and equipment under hire purchase
At cost 15,977 10,004 51 118
Less: Accumulated depreciation (3,712) (2,681) (4) (104)
12,265 7,323 47 14
Plant and equipment under finance lease
At cost 439 439 - -
Less: Accumulated depreciation (278) (190) - -
161 249 - -
42,694 15,884 1,300 452
Plant and equipment at cost include amounts relating to capital works in progress totaling $5,417,000 (2004: $1,967,000).
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 14. Property, plant & equipment (continued)
- 33 -
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the
current financial year are set out below:
Property,
plant &
equipment
Hire
purchase
plant &
equipment
Leased
plant &
equipment Total
$'000 $'000 $'000 $'000
Consolidated
Carrying amount at 1 July 2004 8,312 7,323 249 15,884
Additions 20,108 8,298 - 28,406
Disposals (625) (325) - (950)
Additions through acquisition of entity (note 38) 2,250 2,166 - 4,416
Depreciation/amortisation expense (note 4(a)) (2,548) (2,426) (88) (5,062)
Transfers between asset classes 2,771 (2,771) - -
Carrying amount at 30 June 2005 30,268 12,265 161 42,694
Consolidated
Carrying amount at 1 July 2003 5,795 11,697 361 17,853
Additions 3,116 1,820 - 4,936
Disposals (400) (2,305) (7) (2,712)
Depreciation/amortisation expense (note 4(a)) (1,075) (3,025) (93) (4,193)
Transfers between asset classes 876 (864) (12) -
Carrying amount at 30 June 2004 8,312 7,323 249 15,884
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 14. Property, plant & equipment (continued)
- 34 -
Property,
plant &
equipment
Hire
purchase
plant and
equipment
Leased
plant &
equipment Total
$'000 $'000 $'000 $'000
Parent entity
Carrying amount at 1 July 2004 438 14 - 452
Additions 1,018 51 - 1,069
Disposals (28) - - (28)
Depreciation/amortisation expense (note 4(a)) (189) (4) - (193)
Transfers between asset classes 14 (14) - -
Carrying amount at 30 June 2005 1,253 47 - 1,300
Parent entity
Carrying amount at 1 July 2003 443 70 7 520
Additions 113 - - 113
Depreciation/amortisation expense (note 4(a)) (134) (45) (2) (181)
Transfers between asset classes 16 (11) (5) -
Carrying amount at 30 June 2004 438 14 - 452
Assets pledged as security
Assets under lease or hire purchase are pledged as security for the associated lease or hire purchase liabilities
(notes 20 and 24). Refer to note 24 (sub-heading "Financing arrangements") for information on assets pledged as
security by the consolidated entity.
In addition, the consolidated entity's bank loan facilities are secured by a fixed and floating charge over the assets
of the group.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 35 -
Note 15. Mineral interests
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Capitalised exploration, evaluation and
development expenditures:
Now in production:
Cost
Opening balance 29,943 30,496 - -
Expenditure incurred during the year 9,930 4,305 - -
Controlled entity acquisition during the year 42,221 - - -
Expnditure transferred to capitalised overburden
removal costs (272) (604) - -
Expenditure written off during the year (897) (4,254) - -
Closing balance 80,925 29,943 - -
Accumulated amortisation
Opening balance (9,762) (6,732) - -
Amortisation for the year (6,033) (4,323) - -
Reversal of expenditure written off - 1,293 - -
Closing balance (15,795) (9,762) - -
Net book value 65,130 20,181 - -
In exploration and/or evaluation phase:
Cost
Opening balance 1,881 1,502 - 67
Expenditure incurred during the year 7,474 2,230 83 1,113
Expenditure written off during the year (1,125) (1,851) (65) (1,180)
Controlled entity acquisition during the year 45,653 - - -
Closing balance (a) 53,883 1,881 18 -
119,013 22,062 18 -
(a) No amortisation is charged with respect to costs incurred in the exploration or evaluation phase and accordingly the
cost is equal to net book value.
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful
development and commercial exploitation or sale of the respective mining areas.
Note 16. Deferred tax assets
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Future income tax benefits - losses carried forward 6,574 1,566 - 1,566
Future income tax benefits - timing differences 1,692 1,571 2,016 1,426
8,266 3,137 2,016 2,992
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 36 -
Note 17. Other assets (non-current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Deferred loan establishment costs 83 30 83 30
Deferred foreign exchange loss 3,810 2,735 - -
Capitalised road sealing costs:
Cost
Opening balance 4,502 3,167 - -
Expenditure incurred during the year (65) 1,335 - -
Closing balance 4,437 4,502 - -
Accumulated amortisation
Opening balance (2,150) (1,812) - -
Amortisation for the year (246) (338) - -
Closing balance (2,396) (2,150) - -
Net book value 2,041 2,352 - -
Capitalised decline development & overburden
removal costs:
Opening balance 7,417 3,522 - -
Net deferral/(expensing) of costs 3,245 3,291 - -
Controlled entity acquisition during the year 4,799 - - -
Transfers from mine development costs in production 272 604 - -
Closing balance 15,733 7,417 - -
21,667 12,534 83 30
Note 18. Payables (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Trade creditors 19,979 7,845 636 411
Accruals 15,486 8,251 324 556
35,465 16,096 960 967
Trade creditors are non-interest bearing and are normally settled on 14 to 30 day terms.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 37 -
Note 19. Interest bearing liabilities - stockpile funding (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Stockpile funding facility 14,671 13,027 - -
14,671 13,027 - -
The stockpile funding facility is secured by a first ranking fixed and floating charge over trade receivables and stockpiled
manganese and chromite ore held at Port Hedland. Amounts are repayable within 45 days from drawdown of funds.
Note 20. Interest bearing liabilities - other (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Lease liability (a) 88 79 - -
Bank debt (b) 7,000 - - -
Convertible notes (c) - 7,951 - 7,951
Hire Purchase Liabilities (a) 3,628 1,451 12 -
10,716 9,481 12 7,951
(a) Hire purchase and lease liabilities are secured by charges over each respective leased asset. The implicit interest rates on
finance leases range from 7.79% to 10.52%. Refer to note 36 (c) & (d) for details on timing and amount of future lease
and hire purchase payments.
(b) See note 24 for details of bank security .
(c)All convertible notes were converted to equity on 31 March 2005.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 38 -
Note 21. Provisions (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Employee entitlements (note 37) 4,177 664 3,102 217
Rehabilitation 209 511 - -
4,386 1,175 3,102 217
Movements in provisions
Movements during the financial year in in the provision for rehabilitation (current and non-current) is set out below:
Rehabilitation
(current)
Rehabilitati
on
(non-curren
t) Total
$'000 $'000 $'000
Consolidated
Carrying amount at start of year 511 6 1,133
Adjustments to provisions recognised (302) (259)
Provisions acquired (note 38) - 92
Carrying amount at end of year 209 7 966
Note 22. Tax liabilities (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Income tax payable 15,766 7,187 15,766 7,187
Note 23. Other liabilities (current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Deferred foreign exchange gain 11,539 8,378 - -
Commodity hedge contract payable 464 - - -
12,003 8,378 - -
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 39 -
Note 24. Interest bearing liabilities (non-current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Secured
Lease liabilities (note 20 (a)) 125 213 - -
Hire Purchase liabilities (note 20 (a)) 8,635 2,493 35 -
8,760 2,706 35 -
Financing arrangements
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
The consolidated entity has access to the following
financing facilities with a number of financial
institutions:
Funding arrangements
Total facilities
Stockpile funding facilities 26,163 21,763 - -
Bank debt 56,500 6,500 - -
Equipment finance facilties 15,000 3,750 - -
Total 97,663 32,013 - -
Used at balance date
Stockpile funding facilities 14,671 13,027 - -
Bank debt 7,000 - - -
Equipment finance facilities 5,132 1,577 - -
Total 26,803 14,604 - -
Unused at balance date
Stockpile funding facilities 11,492 8,736 - -
Bank debt 49,500 6,500 - -
Equipment finance facilities 9,868 2,173 - -
Total 70,860 17,409 - -
The above facilities are subject to annual review. $19,622,000 of the stockpile financing facility has no expiry date with the
balance of stockpile financing facilities and the equipment financing facility expiring on 31 October 2007. $50,000,000 of
the bank debt facility expires on 30 May 2006. $6,500,000 of the bank debt facility expires on 31 October 2007.
The consolidated entity's bank loan facilities are secured by a fixed and floating charge over the assets of the group.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 40 -
Note 25. Deferred tax liabilities
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Provision for deferred income tax 10,714 6,686 8,751 6,383
Note 26. Provisions (non-current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Employee entitlements (note 37) 759 289 566 117
Rehabilitation 757 622 - -
1,516 911 566 117
Movements in provisions
Movements during the financial year in the provision for rehabilitation is set out in note 21.
Note 27. Other liabilities (non-current)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Hedge contract payable 3,810 2,735 - -
Loan - Outside equity interest * 834 162 - -
4,644 2,897 - -
* Represented by cash calls made by the outside equity interest into CML's controlled entity; Pilbara Iron Ore Pty Ltd (note
30). This amount will ultimately be converted to equity in Pilbara Iron Ore Pty Ltd.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 41 -
Note 28. Contributed equity
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Ordinary shares 128,852 69,765 128,852 69,765
Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate
in the proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary
shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Terms and conditions of options
Options to acquire shares entitle the holder to purchase one ordinary share in the parent entity. 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. For details of the Employee Share Plan refer to note 37.
Parent entity Parent entity
2005 2004 2005 2004
Shares
000's
Shares
000's
$'000
$000
$'000
$000
Movements in contributed equity for the year:
Opening number of shares 179,310 150,765 69,765 40,775
Options converting to ordinary shares (a) 2,064 3,799 1,417 1,487
Issues under dividend re-investment plan (b) 1,322 1,684 1,903 1,672
Conversion of notes 9,939 2,562 7,951 2,049
Shares issued (c) 14,204 20,500 48,199 25,043
Share issue costs (b) - - - (1,261)
Share buy back (d) (120) - (383) -
Closing number of shares 206,719 179,310 128,852 69,765
(a) During the year 2,064,000 options (2004 – 3,799,000) were exercised at prices ranging from 45 cents to 77 cents.
(b) In October 2002 the Company introduced a dividend reinvestment plan enabling shareholders to elect to apply
cash dividends declared by the Company towards the subscription for new shares at a 3% discount to prevailing
market prices. The Directors resolved to vary the Dividend Reinvestment Plan effective as at 17 March 2005
whereby cash dividends are applied to purchase ordinary shares in the Company on market, free of brokerage.
(c) During the 2005 financial year Reliance Mining Limited was the subject of a successful takeover bid by
Consolidated Nickel Pty Ltd which resulted in the issue of 1 CSM share for every 10 Reliance shares and
convertible notes as per the Bidders Statement dated 27 January 2005 lodged with the Australian Securities and
Investment Commission.
(d) The Company announced on March 30 an on market share buy back of up to 10,342,714 ordinary fully paid shares.
As at the end of the financial year, 120,000 shares or 0.058% of the company's ordinary shares had been bought
back.
Share options
During the financial year, 2,550,000 options over ordinary shares with an average exercise price of $1.70 were issued
(2004: 1,650,000: $0.82). Details are provided in note 37.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 42 -
Note 29. Reserves and retained profits/(accumulated losses)
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
(a) Reserves
Option redemption reserve (4,010) (4,010) (4,010) (4,010)
Consolidated Parent entity
Note 2005 2004 2005 2004
$'000 $'000 $'000 $'000
(b) Retained profits/(accumulated losses)
Retained profits/(accumulated losses) at the
beginning of the financial year 23,028 6,814 1,361 (13,942)
Net profit attributable to members of
Consolidated Minerals Limited 70,327 25,053 31,075 24,142
Dividends provided for or paid 6 (20,792) (8,839) (20,792) (8,839)
Retained profits at the end of the financial
year 72,563 23,028 11,644 1,361
Note 30. Outside equity interests in controlled entities
Consolidated
2005 2004
$'000 $'000
Interest in:
Share capital 1 1
Retained profits 289 288
290 289
Effective 1 July 2003, Fortescue Metals Group Limited (Fortescue) subscribed for a 50% stake in CML’s 100%
owned subsidiary; Pilbara Iron Ore Pty Ltd for the purpose of evaluating and developing the consolidated entity’s
Mindy Mindy iron ore project in the Pilbara region of Western Australia. The partners to this venture will
contribute to the cost of exploration and evaluation. CML retains control of Pilbara Iron Ore Pty Ltd as it can
appoint a chairperson with an additional casting vote. CML is the manager of the venture. The venture will have
access to any rail and port infrastructure developed by Fortescue on the same terms and conditions as third party
users.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 43 -
Note 31. Financial instruments
(a) Derivative financial instruments
Objectives for holding derivative financial instruments
The consolidated entity uses derivative financial instruments to manage both specifically identified foreign
currency risks and also fluctuations in nickel commodity pricing. The consolidated entity is exposed to the risk of
adverse movements in the Australian dollar relative to the United States dollar. The consolidated entity is also
exposed to the risk of adverse movements in the price of nickel. Foreign currency options and forward currency
contracts are purchased to hedge the Australian dollar value of US dollar receipts. Foreign currency options entitle
the consolidated entity to sell US dollars at an agreed rate of exchange, while forward currency contracts commit
the consolidated entity to sell US dollars at an agreed rate of exchange. All foreign currency options and forward
contracts are denominated in US dollars and contracted against Australian dollars. Forward commodity contracts
are also denominated in US dollars and commit the consolidated entity to sell Nickel tonnes at an agreed price.
With respect to the value of US dollar receipts to be hedged, the Board of Directors has approved the following
limits:
i. Minimum of 75% and maximum of 85% of US dollar receipts within the first year;
ii. Minimum of 60% and maximum of 75% of US dollar receipts in the second year; and
iii. Minimum of 50% and maximum of 75% of US dollar receipts in the third year.
With respect to commodity hedging, the Board of Directors has approved the hedging of 70% of Nickel tonnes
produced.
Forward exchange agreements/purchased call option contracts
The following table summarises the Australian dollar value of forward foreign exchange agreements and
purchased call option contracts. Foreign currency amounts are translated at rates current at the reporting date and
represent the Australian dollar equivalent of commitments to sell US dollars. At balance date, the details of
outstanding contracts are:
Foreign currency risk Average exchange
rate
2005 2004 2005 2004
$'000 $'000
Maturity
0 - 3 months 59,798 31,800 0.7024 0.6289
3 - 12 months 167,475 85,096 0.7104 0.6346
12 - 24 months 154,992 110,727 0.7242 0.6548
Greater than 24 months 101,611 85,984 0.7455 0.6978
483,876 313,607 0.7212 0.6585
Nickel price risk Average nickel
price
2005 2004 2005 2004
USD'000 USD'000
USD/tonne
payable
USD/tonne
payable
Maturity
0 - 3 months 1,622 - 15,300 -
3 - 12 months 10,832 - 15,300 -
12,454 - 15,300 -
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 31. Financial instruments (continued)
- 44 -
Hedges of anticipated future transactions
The following table summarises unrealised gains and losses on all forward exchange contracts, purchased call
option contracts and forward commodity contracts, calculated on a mark to market basis and entered as hedges of
future anticipated sales, showing the periods in which they are expected to be recognised as income or expense.
Where hedging instruments are terminated prior to their maturity date, the gain or loss on termination is not
brought to account until the hedged transaction occurs. At the time that the hedged transaction is no longer
expected to occur, the unrealised gains or losses on the hedge transaction are immediately recognised in the
statement of financial performance.
Expected recognition period 30 June 2005 30 June 2004
Gains Losses Gains Losses
$'000 $'000 $'000 $'000
0 - 12 months 10,587 (1,259) 7,355 (134)
12 - 24 months 3,185 (1,348) 3,215 (2,323)
24 - 36 months 628 (833) - (4,045)
14,400 (3,440) 10,570 (6,502)
(b) Credit risk exposures
The exposure of the consolidated entity to credit risk at balance date in relation to each class of recognised
financial asset is the carrying amount of the assets as indicated in the statement of financial position.
The major geographical concentrations of credit risk arise from the location of the counterparties to the
consolidated entity’s financial assets as shown in the following table:
2005 2004
$'000 $'000
Australia 74,551 65,267
Europe 9,372 14,191
Asia 12,492 11,539
96,415 90,997
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 31. Financial instruments (continued)
- 45 -
(c) Interest rate risk exposures
The consolidated entity has entered into borrowings with floating interest rates. The exposure of the consolidated
entity to interest rate risk and the effective weighted average interest rate for classes of financial assets and
liabilities is set out below.
Fixed interest maturing in:
2005
Floating
interest rate 1 year or less
Over 1 to 5
years
Non interest
bearing Total
Notes $'000 $'000 $'000 $'000 $'000
Financial assets
Cash 7 31,774 - - 22 31,796
Trade and sundry debtors 8 - - - 30,297 30,297
Investment in securities 10,13 - - - 15,600 15,600
Loans to Directors 8,12,32 - 88 2,333 - 2,421
Security deposits 12 - - - 25 25
Loans to employees 12 - - - 140 140
Unrealised gains on foreign exchange contracts 11 - - - 323 323
Hedge contract receivable 11 - - - 11,540 11,540
Deferred commodity hedge loss 11 - - - 463 463
Deferred foreign exchange loss 17 - - - 3,810 3,810
31,774 88 2,333 62,220 96,415
Weighted average interest rate 3.37% 5.00% 5.27%
Financial liabilities
Bank loan 20,24 - 7,000 - - 7,000
Trade and other creditors 18 - - - 35,464 35,464
Secured stockpile funding facility 19 14,671 - - - 14,671
Hire purchase and lease liabilities 20,24 - 3,716 8,759 - 12,475
Foreign exchange hedge contract payable 27 - - - 3,810 3,810
Deferred foreign exchange gain 23 11,540 11,540
Commodity hedge contract payable 23 463 463
Loan - Outside equity interest 27 - - - 834 834
14,671 10,716 8,759 52,111 86,257
Weighted average interest rate 4.81% 6.68% 8.59%
Net financial assets (liabilities) 17,103 (10,628) (6,426) 10,109 10,158
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 31. Financial instruments (continued)
- 46 -
Fixed interest maturing in:
2004
Floating
interest rate 1 year or less
Over 1 to 5
years
Non interest
bearing Total
Notes $'000 $'000 $'000 $'000 $'000
Financial assets
Cash 7 38,240 - - 4,377 42,617
Trade and sundry debtors 8 - - - 27,484 27,484
Investment in securities 10,13 - - - 8,443 8,443
Loans to Directors 8,12,32 - 3,590 400 - 3,990
Security deposits 12 - - - 20 20
Hedge contract receivable 11 - - - 8,378 8,378
Other financial assets - investments 13 - - - 65 65
38,240 3,590 400 48,767 90,997
Weighted average interest rate 4.92% 5.00% 6.55%
Financial liabilities
Trade and other creditors 18 - - - 16,097 16,097
Convertible notes 24 - 7,951 - - 7,951
Secured stockpile funding facilities 24 13,027 - - - 13,027
Hire purchase and lease liabilities 20,24 - 1,530 2,706 - 4,236
Hedge contract payable 27 - - - 2,735 2,735
Deferred foreign exchange gain 23 8,378 8,378
Loan - Outside equity interest 27 - - - 162 162
13,027 9,481 2,706 27,372 52,586
Weighted average interest rate 3.18% 10.78% 8.34%
Net financial assets (liabilities) 25,213 (5,891) (2,306) 21,395 38,411
(d) Net fair value of financial assets and liabilities
Except for hedge contract receivables, hedge contract payables and investment shares in corporations quoted on a
prescribed stock exchange (both current and non current - refer notes 10 and 14), the fair values of financial assets and
liabilities materially approximate their carrying values as indicated in the statement of financial position. Hedge contract
receivables and hedge contract payables, which are denominated in US dollars, have been marked to the spot rate as at the
end of the financial year in accordance with AASB 1033: Presentation and Disclosure of Financial Instruments.
Note 32. Related parties
Transactions with related parties in the wholly owned group
During the financial year, unsecured loan advances were made between the parent entity and its controlled entities. All
such loans were interest free. Loan balances between the parent entity and its controlled entities are disclosed in the
financial report of the parent entity. Intra-entity loan balances have been eliminated in the financial report of the
consolidated entity. The ownership interests in related parties in the wholly owned group are set out in note 38.
Other transactions with specified directors and specified executives are set out in note 33.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 47 -
Note 33. Director and executive disclosures
Directors
The following persons were Directors of Consolidated Minerals Limited during the financial year:
Chairman
Colin L Smith
Executive Directors
Michael L Kiernan, Managing Director
David M Macoboy, Finance Director
Allan J Quadrio, Technical Director
Non-executive Directors
Richard S Elman
David N Gilham
Malcolm Randall
R Skatsche-Depisch - Alternate for ML Kiernan
A Day - Alternate for RS Elman
Malcolm Randall stepped down from the position of non-executive Director on 6 April 2005.
During the financial year, Alternate Directors did not received any remuneration, nor did they act in any directorial
capacity. No Alternate Director held any equity interests in CML during the year. No Alternate Director held any
directorships in other listed companies during the 3 years before the end of the financial year.
Executives (other than Directors) with the greatest authority for strategic direction and management
The following persons were the five executives with the greatest authority for the strategic direction and management of the
consolidated entity (“specified executives”) during the financial year:
Name Position
R Baxter General Manager Group Services
M Walters General Manager Marketing
E Rothery Chief Geologist
N Greygoose General Manager Finance & Administration
I Huitson Chief Mining Engineer
All of the above persons were also specified executives for the whole year ended 30 June 2005, except for Mr Rodney
Baxter who commenced employment on 15 February 2005.
Directors and Executives Remuneration Report
Principles used to determine the nature and amount of remuneration
The objective of the company’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and
the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures
that executive reward satisfies the following key criteria for good reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage / alignment of executive compensation
• transparency
• capital management.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 48 -
In consultation with external remuneration consultants, the company has structured an executive remuneration framework
that is market competitive and complementary to the reward strategy of the organisation.
Alignment to shareholders’ interests:
• has profit as a core component of plan design
• focuses on sustained growth in share price as well as focusing the executive on key non-financial drivers of value
• attracts and retains high calibre executives.
Non-executive Directors
Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the
Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The Board also has agreed to
the advice of independent remuneration consultants to ensure non-executive Directors’ fees and payments are appropriate
and in line with the market. The Chairman’s fees are determined independently to the fees of non-executive Directors
based on comparative roles in the external market. Non-executive Directors do not receive share options.
Directors’ fees
Remuneration is inclusive of committee fees. Non-executive Director's fees are determined within an aggregate Directors'
fee pool limit, which is periodically recommended for approval by shareholders and which currently stands at $400,000.
Retirement allowances for Directors
In October 2001 shareholders approved a retirement scheme for Non-Executive Directors of the Company. The scheme
specifies that after three years of service by a Non-Executive Director, and in the event that the Director then retires, the
retiring Director will receive a benefit equal to half of the annual Non-Executive Director's fee for every completed year of
service. The maximum benefit payable to the retiring Director will be an amount equal to five times the Non-Executive
Director's average annual fee over the previous two years.
Executive pay
The executive pay and reward framework consists of the following components:
• base pay and consulting fees
• performance incentives, and
• other remuneration such as superannuation.
The combination of these comprises the executive’s total remuneration.
Base pay
Structured as a total employment cost package, this may be delivered as a mix of cash and prescribed non-financial benefits
at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior
executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also
reviewed on promotion.
There are no guaranteed base pay increases fixed in any senior executives’ contracts.
Retirement benefits
The consolidated entity makes superannuation contributions in compliance with the Superannuation Guarantee legislation.
Superannuation contributions are made to complying funds nominated by each employee.
Performance incentives
For details of performance based remuneration benefits, refer note 1(s) in the Summary of Accounting Policies.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 49 -
Details of remuneration
Details of the nature and amount of each element of the emoluments of each Director of Consolidated Minerals Limited and
each of the officers of the company and the consolidated entity receiving the highest emoluments for the year ended 30
June 2005 are set out in the following tables.
Directors of Consolidated Minerals Limited
Remuneration (2005) CL Smith ML Kiernan DM
Macoboy
AJ Quadrio RS Elman M Randall
(a)
DN Gilham Total
Primary
Salary & directors fees 104,110 541,356 - 286,349 - 54,336 53,201 1,039,352
Consulting fees 134,075 - 368,950 - - 6,750 - 509,775
Profit sharing bonus -
2004
-
252,500
193,500
128,216
-
-
-
574,216
Profit sharing bonus -
2005
-
580,750
370,500
300,000
-
-
-
1,251,250
Non-monetary benefits (b) 3,690 157,907 33,326 4,612 - - - 199,535
Post-employment
Superannuation 9,370 24,000 - 25,771 - 4,890 4,788 68,819
Retirement benefits
provided for/paid
61,313
-
-
-
-
-
34,761
96,074
Other
Insurance 7,719 7,719 7,719 7,719 7,719 7,719 7,719 54,033
Total 320,277 1,564,232 973,995 752,667 7,719 73,695 100,469 3,793,054
Less Profit sharing bonus -
June 2004 (c)
-
252,500
193,500
128,216
-
-
-
574,216
Remuneration - 2005
financial year
320,277 1,311,732 780,495 624,451 7,719 73,695 100,469 3,218,838
Subject to obtaining shareholder approval at the 2005 Annual General Meeting, the Company will issue to Mr Kiernan
760,000 ordinary fully paid shares as an incentive to enter into a 5 year contract, together with 760,000 ordinary fully paid
shares per year over a 5 year period on meeting a performance hurdle of achieving a net profit after tax figure derived from
the Company's annual budget. Shares issued will not be able to be sold by Mr Kiernan until after the expiry of the Contract.
No amount has been included in the disclosure of Director's remuneration in the above table as the shares have not been
granted at 30 June 2005. The company policy pursuant to accounting standard AASB 1046 Director and Executive
Disclosures by Disclosing Entities is to recognise the value of share based compensation between the grant date and the
vesting date which will not necessarily be reflective of the service period.
(a) Malcolm Randall stepped down from the position of Director on 6 April 2005.
(b) Non-monetary benefits include interest benefit on Directors' loans (note 33), and sundry fringe benefits.
(c) During the year, the method of calculation for the profit sharing bonus was changed from a calendar to financial year
basis. As a result, the expense for the six months ended 30 June 2004 is included in the current financial year.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 50 -
Remuneration (2004) CL Smith ML Kiernan DM
Macoboy
AJ Quadrio RS Elman M Randall DN Gilham Total
Primary
Salary & directors fees 96,000 431,044 - 250,000 - 49,541 10,180 836,765
Consulting fees 134,409 - 369,000 - - 3,000 - 506,409
Profit sharing bonus -
2004
-
177,517
143,607
100,681
-
-
-
421,805
Non-monetary benefits 8,542 133,671 17,718 25,820 - - - 185,751
Post-employment
Superannuation 8,640 24,000 - 22,500 - 4,459 916 60,515
Retirement benefits
provided for/paid
52,320
-
-
-
-
-
-
52,320
Other
Insurance 6,898 6,898 6,898 6,898 6,898 6,898 6,898 48,286
Remuneration for 2004 306,809 773,130 537,223 405,899 6,898 63,898 17,994 2,111,851
Specified executives of the consolidated entity
Remuneration (2005) R Baxter (a) I Huitson E Rothery N Greygoose M Walters Total
Primary
Salary & fees 167,466 202,369 193,961 199,033 255,781 1,018,610
Profit sharing bonus - 2004 - 104,426 78,319 96,967 124,317 404,029
Profit sharing bonus - 2005 111,781 210,000 203,493 221,178 272,979 1,019,431
Non-monetary benefits 3,130 - - - 7,918 11,048
Post-employment
Superannuation 15,072 18,213 17,456 17,913 23,020 91,674
Equity
Options (b) 129,606 - - - - 129,606
Total 427,055 535,008 493,229 535,091 684,015 2,674,398
Less Profit sharing bonus - June 2004 (c) - 104,426 78,319 96,967 124,317 404,029
Remuneration - 2005 financial year 427,055 430,582 414,910 438,124 559,698 2,270,369
(a) Rodney Baxter was appointed on 15 February 2005.
(b) The fair value of each option has been measured using the Black-Scholes option pricing model. For the current year, the
model assumes a volatility of 28% (2004: 22%) and a risk-free interest rate of 5.63% (2004: 4.63%) Refer note 37(d) for
further details in relation to these options over unissued shares.
(c) During the year, the method of calculation for the profit sharing bonus was changed from a calendar to financial year
basis. As a result, the expense for the six months ended 30 June 2004 is included in the current financial year.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 51 -
Remuneration (2004) I Huitson E Rothery N Greygoose M Walters J Brodziak Total
Primary
Salary & fees 207,255 159,470 177,571 241,878 223,076 1,009,251
Profit sharing bonus - 2004 81,722 62,042 60,813 99,912 124,085 428,574
Non-monetary benefits - - - 14,563 2,753 17,316
Post-employment
Superannuation 18,653 14,352 15,981 21,769 63,462 134,217
Equity
Options - 2,129 - - 7,224 9,353
Remuneration for 2004 307,630 237,993 254,365 378,122 420,600 1,598,711
Service agreements
Remuneration and other terms of employment for the executive Directors are formalised in service agreements. Provisions
of the agreements relating to remuneration are set out below:
M L Kiernan, Managing Director
• Term of agreement - 5 years commencing 1 July 2004.
• Base salary, inclusive of superannuation and motor vehicle benefits for the year ended 31 December 2005 of
$656,500 to be reviewed annually by the remuneration committee.
• Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 2
times base salary.
• Entitlement to remuneration from a profit sharing pool (note 1 (s))
• Subject to obtaining shareholder approval at the 2005 Annual General Meeting, the Company will issue to Mr
Kiernan 760,000 ordinary fully paid shares as an incentive to enter into the 5 year contract, together with 760,000
ordinary fully paid shares per year over a 5 year period of the Contract and on condition that a performance hurdle of
achieving a net profit after tax figure derived from the Company's annual budget. Shares issued will not be able to be
sold by Mr Kiernan until after the expiry of the Contract. The rationale for grant of the shares is that they will provide
a long term incentive to Mr Kiernan, that aligns his interests with those of Shareholders by placing a portion of his
remuneration at risk, based on sustained Company performance. Underperformance will result in Mr Kiernan
foregoing a portion of his overall available remuneration.
D M Macoboy, Finance Director
• Term of agreement - 3 years commencing 1 July 2003.
• Base consulting fee for the year ended 30 June 2005 to a maximum of $408,000.
• Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 2
times base salary.
• Entitlement to remuneration from a profit sharing pool (note 1(s) )
A J Quadrio, Technical Director
• Term of agreement - no fixed term.
• Base salary inclusive of superannuation for the year ended 30 June 2005 of $300,000 to be reviewed annually by the
remuneration committee.
• Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 1
times base salary.
• Entitlement to remuneration from a profit sharing pool (note 1(s) )
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 52 -
Option holdings
The number of options held during the financial year by any of the five specified executives of the consolidated entity,
including their personally-related entities, are set out below. No Director of Consolidated Minerals Limited held options
over ordinary shares in the company during the year.
Name
Balance at the
start of the year
Granted during
the year as
remuneration
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
Specified executives of the consolidated entity
E Rothery 150,000 - (150,000) - - -
R Baxter - 1,000,000 - - 1,000,000 -
Convertible note holdings
The number of convertible notes held during the financial year by any Director of Consolidated Minerals Limited,
including their personally-related entities, is set out below. No specified executives of the consolidated entity held
convertible notes during the year.
Name
Balance at the
start of the year
Other changes
during the year
Converted
during the year
Balance at the
end of the year
Directors of Consolidated Minerals Limited
David M Macoboy 160,000 - 160,000 -
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 53 -
Share holdings
The numbers of shares in the company held during the financial year by each Director of Consolidated Minerals Limited
and each of the five specified executives of the consolidated entity, including their personally-related entities, are set out
below.
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 Consolidated Minerals Limited
Ordinary shares
Colin L Smith 1,750,000 - (248,608) 1,501,392
Michael L Kiernan 4,500,000 - (1,390,000) 3,110,000
David M Macoboy 2,586,000 - (1,586,000) 1,000,000
Allan J Quadrio 1,800,000 - (701,332) 1,098,668
Malcolm Randall 10,618 - - -
David N Gilham 350,000 - 150,000 500,000
Specified executives of the consolidated entity
Ordinary shares
I Huitson 62,087 - (9,000) 53,087
N Greygoose 14,000 - (10,500) 3,500
M Walters 17,868 - (17,868) -
E Rothery - 150,000 2,624 152,624
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 54 -
Loans to Directors and executives
Details of loans made to Directors of Consolidated Minerals Limited and the five specified executives of the consolidated
entity, including their personally-related entities, are set out below.
Aggregates for Directors and specified executives
2005
Group
Balance at the
start of the year
Interest paid
and payable for
the year
Interest not
charged
Balance at the
end of the year
Number in
group at the end
of the year
$ $ $ $
Directors of the consolidated entity 3,901,048 143,498 53,808 2,421,468 1
Specified executives of the consolidated
entity
- - 1,004 50,000 1
2004
Group
Balance at the
start of the year
Interest paid
and payable for
the year
Interest not
charged
Balance at the
end of the year
Number in
group at the end
of the year
$ $ $ $
Directors of the consolidated entity 4,014,685 194,299 63,919 3,990,356 4
Specified executives of the consolidated
entity
- - - - -
Individuals with loans above $100,000 during the financial year
Group
Balance at the
start of the year
Interest paid
and payable for
the year
Interest not
charged (d)
Balance at the
end of the year
Highest
indebtedness
during the year
$ $ $ $ $
Specified Director
Colin L Smith (a) 484,140 7,921 3,786 - 484,140
Michael L Kiernan (a) 1,407,547 17,064 8,126 - 1,407,547
Michael L Kiernan (b) 400,000 26,158 1,997 400,000 400,000
Michael L Kiernan (c) - 66,039 27,315 2,021,468 2,021,468
David M Macoboy (a) 1,004,187 16,413 7,852 - 1,004,187
Allan J Quadrio (a) 605,175 9,903 4,732 - 605,175
(a) On 26 October 2001 shareholders approved CML granting financial assistance in the form of a loan bearing
interest at 5% p.a. to the Directors for the purpose of purchasing 9,277,778 ordinary fully paid shares in CML at
market value from Lion Selection Group Limited. Amounts advanced are non-recourse and are secured over the
shares to which the advance relates. Repayments are made from dividends declared by CML. These loans were
repaid during the financial year.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 33. Director and executive disclosures (continued)
- 55 -
(b) $400,000 was advanced to Michael Kiernan on 5 March 2004. The loan is for a period of 5 years and is repayable
in full either on 5 March 2009 or earlier if Mr Kiernan’s services as a Director are terminated. Interest is payable
monthly in arrears at a rate of 6.55% being the standard variable rate for owner-occupied housing loans published
by the Reserve Bank of Australia before the beginning of the 2004 Fringe Benefits Tax year. The amount is
secured over Michael Kiernan's employee entitlements and termination payments on cessation of employment.
(c) On 28 October 2004 shareholders approved CML granting financial assistance in the form of a loan bearing
interest at 5% p.a. to Michael Kiernan for the purpose of purchasing 1,049,940 ordinary fully paid shares in CML
at market value. Amounts advanced are non-recourse and are secured over the shares to which the advance relates.
Repayments are made from dividends declared by CML.
(d) The Directors have determined that the loans in (a) and (c) above have been provided to Directors at a discount to
market with the market rate determined to be the standard variable rate for owner-occupied housing loans
published by the Reserve Bank of Australia before the beginning of the 2005 Fringe Benefits Tax year. This rate is
7.05%. Interest not charged represents the benefit arising from the provision of the loan at the discount to market.
This amount is included in Directors' remuneration.
Other transactions with Directors and specified executives
Directors of Consolidated Minerals Limited
Directors of the consolidated entity or their director related entities, conduct transactions with entities within the
consolidated entity that occur within a normal employee, customer or supplier relationship on terms and conditions no more
favourable than those with which it is reasonable to expect the entity would have adopted if dealing with the Director or
director related entity at arms length in similar circumstances.
These transactions include sales to Noble Resources Limited ("Noble"), one of the parent entity's substantial shareholders
and major customer of ferrous raw materials produced by the consolidated entity. Mr R S Elman is a director and
shareholder of Noble. The consolidated entity has traded, and continues to trade, with Noble on an at-arms-length basis for
the sale of ferrous raw metals.
The following transactions have been quantified below where they are considered likely to be of interest to users of these
financial statements:
2005 2004
$ $
Amounts recognised as expense
Athena Capital Pty Ltd (J L Kiernan) for the provision of investment consultancy services. - 7,500
- 7,500
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 56 -
Note 34. Remuneration of auditors
Consolidated Parent entity
2005 2004 2005 2004
$ $ $ $
1. Audit services
Amounts payable or due and payable to Ernst & Young
for auditing the financial reports 119,181 80,679 119,181 80,679
Amounts payable or due and payable to KPMG for
internal audit services 21,963 37,475 21,963 37,475
Total remuneration for audit services 141,144 118,154 141,144 118,154
2. Other assurance services
Remuneration for other assurance services paid or due
and payable to Ernst & Young 281,235 69,504 85,367 69,504
Remuneration for other assurance services paid or due
and payable to KPMG 9,601 38,078 9,601 38,078
Total remuneration for other assurance services 290,836 107,582 94,968 107,582
431,980 225,736 236,112 225,736
Taxation services
Fees for tax compliance services paid or due and
payable to Ernst & Young 76,522 50,150 66,531 50,150
Fees for tax compliance services paid or due and
payable to KPMG 28,300 22,500 28,300 22,500
Total remuneration for taxation services 104,822 72,650 94,831 72,650
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 57 -
Note 35. Contingent liabilities
(e) An effect of the Native Title Act 1994 (Commonwealth) is that new mining tenement applications and
existing tenements in Australia may be affected by native title claims. The full impact of the legislation
and native title claims generally may have on tenements held by the consolidated entity is presently
unclear. At the date of this report, the Directors are aware of ten claims that have been lodged covering
an area which encompasses some of the mining tenement interests of the consolidated entity. The
claims do not affect the current mining schedule of the consolidated entity.
(b) The parent entity is guarantor to hire purchase and finance lease agreements amounting to $12,429,625
(2004: $4,326,205), entered into by controlled entities used primarily to finance the purchase of the
consolidated entity's mining fleet. Amounts owing under the leases are secured against each relevant
leased asset.
(c) Controlled entities have issued performance bonds totaling $1,346,300 (2004: $1,897,300) to the
Department of Industry and Resources of Western Australia which guarantee the entities' compliance
with the rehabilitation and restoration conditions of Mining Licenses.
(d) Indemnity agreements have been entered into between CML and each of the Directors and officers of
CML. Under the agreements, CML has agreed to indemnify those officers against any claim or for any
expenses or costs which may arise as a result of work performed in their respective capacities as officers
of entities in the consolidated entity. No monetary limit applies to this agreement, and no known
obligations have emerged as a result of this agreement.
(e) A claim for wrongful termination has been lodged in relation to six haulage contractors who were
terminated for a breach of safety and operational procedures. The Company is unable to determine the
value of the claim and continues to defend this claim vigorously.
Note 36. Expenditure commitments
(a) Mining tenement expenditure
Under the terms of tenement licences granted by the Department of Industry and Resources of Western Australia, minimum
annual expenditure obligations must be met in order for mining tenements to maintain a status of good standing. An
amount of $4,639,010 (2004: $2,739,654) to be spent each year whilst tenements remain current may be required to be
expended during the forthcoming financial year on mining tenements in which the consolidated entity has an interest. This
expenditure may be subject to variation from time to time in accordance with the Department of Industry and Resources of
Western Australia regulations.
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
(b) Operating leases
Commitments for minimum lease payments in relation
to non-cancelable operating leases are payable as
follows:
Within one year 5,166 2,172 689 156
Later than one year but not later than 5 years 5,978 3,553 2,133 156
11,144 5,725 2,822 312
Operating leases are entered into as a means of securing the use of mining equipment, business and storage premises as well
as telecommunication services. Rental payments are fixed except for the business premises lease which has an inflation
escalation clause and renewal option. No operating lease arrangements create restriction on any other financing
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 36. Expenditure commitments (continued)
- 58 -
transaction.
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
(c) Finance leases
Commitments in relation to non-cancelable finance
leases are payable as follows:
Within one year 106 106 - -
Later than one year but not later than 5 years 131 237 - -
237 343 - -
Less: Future finance charges (24) (51) - -
213 292 - -
Representing lease liabilities:
Current (note 20) 88 79 - -
Non-current (note 24) 125 213 - -
213 292 - -
Finance leases are entered into as a means of funding the acquisition of minor items of plant and equipment. Rental
payments are fixed and have no escalation clauses. No lease arrangements create restrictions on any other financing
transaction.
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
(d) Hire purchase liabilities
Commitments in relation to non-cancelable hire
purchase liabilities are payable as follows:
Within one year 4,496 1,752 15 -
Later than one year but not later than 5 years 9,517 2,696 38 -
14,013 4,448 53 -
Less: Future finance charges (1,750) (504) (6) -
12,263 3,944 59 -
Representing lease liabilities:
Current (note 20) 3,628 1,451 12 -
Non-current (note 24) 8,635 2,493 35 -
12,263 3,944 47 -
Hire purchase loans are entered into as a means of funding the acquisition of items of plant and equipment. Rental
payments are fixed and have no escalation clauses. No hire purchase arrangements create restrictions on any other
financing arrangements.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 59 -
Note 37. Employee entitlements
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
The aggregate employee benefit liability is
comprised of:
Amounts included in accruals - current (note 18) - 75 - 20
Provision for employee entitlements - current (note
21) 4,177 664 3,102 217
Provision for employee entitlements - non-current
(note 26) 759 289 566 117
Aggregate employee benefit and related on-costs
liabilities 4,936 1,028 3,668 354
Number Number
2005 2004 2005 2004
Employee numbers
The number of full time equivalents employed as at the
balance date are: 137 54 25 16
Employee Share Plan
An employee share plan has been established where CML may grant options over the ordinary shares of CML to staff of
the consolidated entity who have been continuously employed by CML for at least six months. The options are issued for
nil consideration, and are granted at the discretion of Directors. The options cannot be transferred, are not quoted on the
ASX and carry no dividend and voting rights. The exercise price of options is based on the weighted average price at which
the Company's shares are traded on the Australian Stock Exchange during a specified period immediately before the
options are granted plus the 10 year bond rate plus 5%. Unless otherwise indicated, options become exercisable one year
after the grant date. Once able to be exercised, options are exercisable at any time whilst the holder is employed by CML
and during the period ending 3 months after the holder ceases to be employed by CML. When exercisable, each option is
convertible into one ordinary share.
Options may also be issued outside of the employee share plan. These options are offered at management's discretion to
prospective employees as an incentive to commence employment with CML.
Set out below are summaries of options granted and still outstanding at the beginning and/or the end of the financial year.
Options issued pursuant to the employee share plan have been identified by an asterix (*).
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 37. Employee entitlements (continued)
- 60 -
Grant date Expiry date Exercise
price ($)
Balance at
start of the
year
Number
Issued during
the year
Number
Exercised
during the
year
Number
Lapsed or
cancelled
during the
year
Number
Balance at the
end of the year
Number
Consolidated and parent entity - 2005
06 Nov 01 06 Nov 04 * 0.45 540,500 - (440,500) (100,000) -
12 Sep 02 12 Sep 05 * 0.71 650,000 - (500,000) - 150,000
25 Jul 03 25 Jul 06 * 0.77 1,400,000 - (1,124,000) - 276,000
13 Apr 04 13 Apr 09 (a) 1.07 250,000 - - - 250,000
18 Jun 04 18 Jun 09 (b) 1.06 - 100,000 - - 100,000
23 Sep 04 23 Sep 07 * 1.59 - 1,350,000 - - 1,350,000
28 Sep 04 28 Sep 09 (c) 1.40 - 100,000 - - 100,000
7 Dec 04 7 Dec 09 (d) 1.94 - 1,000,000 - - 1,000,000
2,840,500 2,550,000 (2,064,500) (100,000) 3,226,000
Consolidated and parent entity - 2004
31 May 99 31 May 04 * 0.315 2,125,000 - (2,125,000) - -
06 Nov 01 06 Nov 04 * 0.45 1,481,000 - (940,500) - 540,500
12 Sep 02 12 Sep 05 * 0.71 1,200,000 - (400,000) (150,000) 650,000
21 Oct 02 21 Oct 07 0.56 1,000,000 - (333,333) (666,667) -
25 Jul 03 25 Jul 06 * 0.77 - 1,400,000 - - 1,400,000
13 Apr 04 13 Apr 09 1.07 - 250,000 - - 250,000
5,806,000 1,650,000 (3,798,833) (816,667) 2,840,500
The following options have been issued in addition to the employee share plan. They are excercisable in the following
tranches:
(a) i) between 13 April 2005 and 12 April 2006: a maximum of 33.33% of the options held
ii) between 13 April 2006 and 12 April 2007: a maximum of 66.67% of the options held, reduced by the
percentage of options converted in i)
iii) between 13 April 2007 and 13 April 2009: the balance of any options held.
(b) i) between 18 June 2005 and 17 June 2006: a maximum of 33.33% of the options held
ii) between 18 June 2006 and 17 June 2007: a maximum of 66.67% of the options held, reduced by the
percentage of options converted in i)
iii) between 18 June 2007 and 18 June 2009: the balance of any options held.
These options were issued in the current year with a retrospective grant date being 18 June 2004.
(c) i) between 28 September 2005 and 27 September 2006: a maximum of 33.33% of the options held
ii) between 28 September 2006 and 27 September 2007: a maximum of 66.67% of the options held, reduced by
the percentage of options converted in i)
iii) between 28 September 2007 and 28 September 2009: the balance of any options held.
(d) i) between 7 December 2005 and 6 December 2006: a maximum of 33.33% of the options held
ii) between 7 December 2006 and 6 December 2007: a maximum of 66.67% of the options held, reduced by the
percentage of options converted in i)
iii) between 7 December 2007 and 7 December 2009: the balance of any options held.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 37. Employee entitlements (continued)
- 61 -
Information with respect to options exercised during the financial year and number of shares issued to employees on the
exercise of options is as follows:
Consolidated Parent entity
Exercise date
Fair value of shares at
issue date ($)
2005
Number
2004
Number
2005
Number
2004
Number
02 Aug 04 1.46 192,500 - 192,500 -
28 Aug 04 1.63 663,000 - 663,000 -
13 Sep 04 1.50 619,000 - 619,000 -
24 Sep 04 1.57 200,000 - 200,000 -
23 Nov 04 2.05 25,000 - 25,000 -
22 Dec 04 2.61 100,000 - 100,000 -
07 Jan 05 2.63 25,000 - 25,000 -
19 Jan 05 2.61 100,000 - 100,000 -
28 Jan 05 3.08 100,000 - 100,000 -
18 Mar 05 3.98 40,000 - 40,000 -
28 Jul 03 0.74 - 74,500 - 74,500
26 Aug 03 0.85 - 252,500 - 252,500
4 Sep 03 0.85 - 250,000 - 250,000
9 Sep 03 0.85 - 450,000 - 450,000
12 Sep 03 0.86 - 158,000 - 158,000
18 Sep 03 0.81 - 150,000 - 150,000
22 Oct 03 0.90 - 223,000 - 223,000
17 Nov 03 1.01 - 303,332 - 303,332
1 Dec 03 0.94 - 420,001 - 420,001
19 Dec 03 0.91 - 150,000 - 150,000
30 Jan 04 1.03 - 60,000 - 60,000
8 Mar 04 1.30 - 100,000 - 100,000
18 Mar 04 1.20 - 1,092,000 - 1,092,000
19 Mar 04 1.18 - 15,500 - 15,500
23 Apr 04 1.17 - 50,000 - 50,000
14 Jun 04 1.15 - 50,000 - 50,000
2,064,500 3,798,833 2,064,500 3,798,833
Total number issued to employees, net of cancellations, since commencement of scheme is 10,468,333 (2004: 8,018,333).
The total number approved by shareholders is 10,538,262 (2004: 9,188,262).
Employees' Superannuation Fund
The consolidated entity makes superannuation contributions in compliance with the Superannuation Guarantee legislation.
Superannuation contributions are made to complying funds nominated by each employee.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 62 -
Note 38. Investments in controlled entities
Name of entity
Country of
incorporation
Class of
shares Equity holding Cost of parent entity's investment
2005 2004 2005 2004
% % $'000 $'000
Pilbara Manganese Pty Ltd * Australia Ordinary 100 100 10 10
Pilbara Chromite Pty Ltd * Australia Ordinary 100 100 817 817
Pilbara Iron Ore Pty Ltd Australia Ordinary 50 50 1 1
Pilbara Contracting Pty Ltd Australia Ordinary 100 100 - -
Pilbara Marine Pty Ltd Australia Ordinary 100 100 - -
Pilbara Exploration Pty Ltd (a) Australia Ordinary - 100 - 1,350
Pilbara Trucking Pty Ltd Australia Ordinary 100 100 - -
Consolidated Nickel Pty Ltd Australia Ordinary 100 100 - -
Consolidated Coal Pty Ltd Australia Ordinary 100 100 - -
Consolidated Iron Ore Pty Ltd Australia Ordinary 100 100 - -
Consolidated Copper Pty Ltd Australia Ordinary 100 - - -
Consolidated Zinc Resources Pty Ltd (b) Australia Ordinary 100 100 600 600
Reliance Nickel Pty Ltd Australia Ordinary 100 - - -
Reliance Mining Ltd Australia Ordianry 100 - - -
Reliance Minerals Ltd Australia Ordinary 100 - - -
Minera Reliance de la Peru Peru Ordinary 100 - - -
1,428 2,778
* Pursuant to Class Order 98/1418, relief has been granted to Pilbara Manganese Pty Ltd and Pilbara Chromite Pty Ltd
from the Corporations Act 2001 requirements for preparation, audit and lodgment of their financial reports.
As a condition of the Class Order, CML and its controlled entities other than Reliance Mining Ltd, Reliance Nickel Pty
Ltd, Reliance Minerals Ltd and Minera Reliance de la Peru (the "Closed Group") have entered into a Deed of Cross
Guarantee. The effect of the deed is that CML has guaranteed to pay any deficiency in the event of winding up of any
controlled entity within the closed group. Controlled entities within the Closed Group have also given a similar
guarantee in the event that CML is wound up.
The consolidated statements of financial performance and financial position of the entities which are members of the
closed group are disclosed in note 39.
(a) Pilbara Exploration Pty Ltd was deregistered on 5 December 2004.
(b) Consolidated Zinc Resources Pty Ltd was formerly named Pilbara Ferro-Alloys Pty Ltd.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 38. Investments in controlled entities (continued)
- 63 -
Acquisition of controlled entity
On 1 March 2005 Consolidated Nickel Pty Ltd; a subsidiary of the parent entity, acquired 100% of the issued share capital
of Reliance Mining Ltd and its controlled entities for $92,860,000. The operating results of this newly controlled entity
have been included in the consolidated statements of financial performance since the date of acquisition.
Details of the acquisition are as follows:
2005
$'000
Fair value of identifiable net assets of controlled entity acquired
Cash 3,509
Receivables 7,760
Inventories 19
Plant & equipment 4,416
Mineral Interests 87,874
Mine development 4,799
Future income tax benefit 6,465
Other assets 291
Creditors & payables (5,714)
Bank loan (1,200)
Hire purchase & lease liabilities (1,914)
Employee entitlements (377)
Provision for deferred tax (1,119)
Sundry provisions (376)
Bank hedging liabilities (11,573)
92,860
Less: Miscellaneous costs of acquisition (1,861)
Less: Equity consideration (48,199)
Cash Consideration 42,800
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Outflow of cash to acquire controlled entity, net of
cash acquired
Cash consideration 42,800 - - -
Cash acquired (3,509) - - -
Outflow of cash 39,291 - - -
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 64 -
Note 39. Deed of cross guarantee
For the year ended 30 June 2005, all companies within the group of Consolidated Minerals Ltd other than Reliance Mining
Ltd, Reliance Nickel Pty Ltd, Reliance Minerals Ltd and Minera Reliance de la Peru (the "Closed Group") are parties to a
deed of cross guarantee under which each company guarantees the debts of the others. For the year ended 2004, the closed
group consisted of all companies within the Consolidated Minerals Limited group. By entering into the deed, the
wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors' report under
Class Order 98/1418 (as amended by Class Orders 98/2017, 00/0321, 01/1087, 02/0248 and 02/1017) issued by the
Australian Securities & Investments Commission.
Set out below is a consolidated statement of financial performance for the year ended 30 June 2005 of the Closed Group.
2005 2004
$'000 $'000
Profit from ordinary activities before income tax expense 96,886 34,544
Income tax expense (27,797) (9,203)
Profit from ordinary activities after income tax expense/net profit 69,089 25,341
Net profit attributable to outside equity interest - (288)
Expenses recognised directly in equity - (1,261)
Total revenues, expenses and valuation adjustments recognised directly in equity - (1,549)
Total changes in equity other than those resulting from transactions with owners as
owners 69,089 23,792
Set out below is a summary of movements in consolidated retained profits for the year ended 30 June 2005 of the Closed
Group.
2005 2004
$'000 $'000
Summary of movements in consolidated retained profits
Retained profits at the beginning of the financial year 23,316 6,814
Profit from ordinary activities after income tax expense/net profit 69,089 25,341
Dividends provided for or paid (20,792) (8,839)
Retained profits at the end of the financial year 71,613 23,316
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 39. Deed of cross guarantee (continued)
- 65 -
Set out below is a consolidated statement of financial position as at 30 June 2005 of the Closed Group.
2005 2004
$'000 $'000
Current assets
Cash assets 27,447 42,617
Receivables 25,699 31,074
Inventories 30,787 11,985
Other 14,300 12,611
Total current assets 98,233 98,287
Non-current assets
Receivables 9,227 485
Investments 107,269 5,227
Property, plant and equipment 34,021 15,884
Mineral Interests 30,246 22,062
Deferred tax assets 8,266 3,137
Other 6,813 12,534
Total non-current assets 195,842 59,329
Total assets 294,075 157,616
Current liabilities
Payables 28,754 16,097
Interest bearing liabilities 16,830 22,508
Current tax liabilities 15,766 7,187
Provisions 3,951 1,175
Other 11,702 8,378
Total current liabilities 77,003 55,345
Non-current liabilities
Interest bearing liabilities 4,978 2,706
Deferred tax liabilities 10,714 6,686
Provisions 280 911
Other 4,645 2,897
Total non-current liabilities 20,617 13,200
Total liabilities 97,620 68,545
Net assets 196,455 89,071
Equity
Contributed equity 128,852 69,765
Reserves (4,010) (4,010)
Retained profits 71,613 23,316
Total equity 196,455 89,071
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 66 -
Note 40. Subsequent events
(a) CML made a share placement to Australian based institutions of 10.2 million shares at an issue price of $4.00 per share.
(b) Final fully franked dividends recommended subsequent to the end of the financial year of 12 cents per share or $26.1
million are payable on 7 October 2005 (refer to note 6 in the financial statements).
(c) CML increased its stake in ASX listed copper producer; Jabiru Metals Limited to 19.9% for $7.33million.
Note 41. Reconciliation of profit from ordinary activities after income tax to net cash inflow from
operating activities
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Profit from ordinary activities after income tax 70,327 25,341 31,075 24,142
Depreciation 4,974 4,100 193 179
Amortisation of mineral interests 6,033 4,323 - -
Amortisation of loan establishment costs 355 269 165 230
Amortisation of road sealing costs 246 338 - -
Amortisation of plant and equipment under finance
lease 88 93 - 2
Gain on sale of investments (25,370) (871) (25,363) (871)
Loss/(gain) on sale of plant and equipment (114) 385 28 -
Net capitalisation of overburden removal costs &
decline development costs (3,244) (3,291) - -
Loan forgiven to controlled entity - - (7) 894
Net unrealised foreign exchange gains - (96) - (4)
Exploration, evaluation and development expenditure
written off 816 4,050 65 789
AIM listing costs written off - 391 - 391
Provision for diminution in value of investments 98 20 30 20
Dividends from controlled entity - - (20,000) (31,000)
Transfer of tax balances from controlled entities - - (25,756) (12,355)
Loss on sale of tenements 12 - - -
Divestment of shares in subsidiary - 289 - -
(Increase)/decrease in receivables 8,066 (5,979) (4) (4)
(Increase)/decrease in inventories (18,844) (2,583) - 17
(Increase)/decrease in future income tax benefit 1,179 (636) 3,673 (648)
Decrease/(increase) in deferred loss on pre-delivered
foreign exchange contracts - 746 - -
Decrease/(increase) in prepayments and capitalised
foreign exchange premiums (110) 134 (388) 145
Increase/(decrease) in payables 4,623 2,820 (330) 459
Increase/(decrease) in provision for current tax
liabilities 8,579 7,734 5,882 7,734
Increase/(decrease) in provision for deferred tax
liabilities 3,068 823 2,368 678
Increase/(decrease) in other provisions 2,443 2,034 3,334 92
Increase in unrealised foreign exchange gain (323) - - -
Net cash inflow from operating activities 62,902 40,434 (25,035) (9,110)
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 67 -
Note 42. Non-cash financing and investing activities
Consolidated Parent entity
2005 2004 2005 2004
$'000 $'000 $'000 $'000
Acquisition of plant and equipment by means of hire
purchase agreements 8,298 1,878 - -
Value of trade-in on sale of plant and equipment used
to acquire new plant and equipment - 12 - 12
Dividend acquired from controlled entity - - 20,000 31,000
Issue of shares pursuant to dividend reinvestment plan 1,903 1,672 1,903 1,672
Interest received capitalised into Director’s loans (note
33) 117 194 117 194
Repayment of Director’s loans by way of dividends
(note 33) 348 357 348 357
Value of converted notes 7,951 2,049 7,951 2,049
Acquisition of controlled entity by way of issued
equity 48,199 - 48,199 -
Note 43. Earnings per share
Consolidated
2005 2004
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 188,760,697 160,027,262
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share 197,326,297 173,839,959
Consolidated
2005 2004
$'000 $'000
Net profit 70,327 25,341
Net profit attributable to outside equity interest - (288)
Earnings used in calculating basic earnings per share 70,327 25,053
Net profit 70,327 25,341
Net profit attributable to outside equity interest - (288)
Interest savings on convertible notes 469 697
Earnings used in calculating diluted earnings per share 70,796 25,750
Conversions and issues after 30 June 2005
Since the end of the financial year, and up to the date of completion of this financial report, 263,633 ordinary shares have
been issued pursuant to the Employee Share Plan. In addition, 1,900,000 potentially dilutive options have been issue since
the end of the financial year.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 43. Earnings per share (continued)
- 68 -
Information concerning the effect of dilutive securities
Dilutive securities
Options granted to employees under the Employee Share Plan (note 37), are considered to be potential ordinary shares and
have been included in the determination of diluted earnings per share. The options have not been included in the
determination of basic earnings per share. The weighted average number of options included in the calculation of diluted
EPS is 1,404,232 (2004: 1,956,500).
The weighted average number of convertible notes included in the calculation of diluted EPS is 7,161,368 (2004:
11,856,197).
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
- 69 -
Note 44. Impacts of adopting Australian equivalents to IFRS
The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards
(IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian
equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB interpretations
originated by the International Financial Reporting Interpretations Committee or the former Standing
Interpretations Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS. The
adoption of AIFRS will be first reflected in the consolidated entity’s financial statements for the half-year ending
31 December 2005 and the year ending 30 June 2006.
Entities complying with AIFRS for the first time will be required to restate their comparative financial statements
to amounts reflecting the application of AIFRS to that comparative period. Most adjustments required on transition
to AIFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.
CML is continuing to transition its accounting policies and financial reporting from current Australian Standards
to Australian equivalents of AIFRS (AIFRS). The company has established a project team and continues to engage
expert consultants to aid in this transition.
The project team is continuing to analyse the AIFRS and the accounting policy changes that will be required. In
some cases choices of accounting policies are available, including elective exemptions under Accounting Standard
AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards. These
choices have been analysed to determine the most appropriate accounting policy for the consolidated entity.
The known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been
prepared using AIFRS from 1 July 2004 are set out below.
Although the adjustments disclosed in this note are based on management’s best knowledge of expected standards
and interpretations, and current facts and circumstances, these may change. For example, amended or additional
standards or interpretations may be issued by the AASB and the IASB. Therefore, until the company prepares its
first full AIFRS financial statements, the possibility cannot be excluded that the accompanying disclosures may
have to be adjusted.
(a) Income tax
Under AASB 112 Income Taxes, deferred tax balances are determined using the balance sheet method which
calculates temporary differences based on the carrying amounts of an entity’s assets and liabilities in the statement
of financial position and their associated tax bases. This will result in deferred tax assets and deferred tax liabilities
being netted to show a single deferred tax asset or liability. In addition, current and deferred taxes attributable to
amounts recognised directly in equity are also recognised directly in equity. The most significant impact will be
the recognition of a deferred tax liability in relation to project acquisition costs, however this will be offset by the
tax effect of various other adjustments under AIFRS. At the date of transition to AIFRS, the net financial effect is
a reduction in retained earnings of $1,935,000.
(b) Leases
The company is currently considering the impact of AASB 117 Leases and as such is reviewing significant
contractual arrangements to determine whether they contain leases as defined in AASB 117.
(c) Business combinations
In March 2005 the company acquired a controlling interest in Reliance Mining Limited. The company is currently
reviewing the acquisition accounting in accordance with the requirements of AASB 3 Business Combinations.
(d) Equity-based compensation benefits
Under AASB 2 Share-based Payments, from 1 July 2004 the group is required to recognise an expense for those
options that were issued to employees under the Consolidated Minerals Limited Employee Option Plan after 7
November 2002 but that had not vested by 1 January 2005.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 44. Impacts of adopting Australian equivalents to IFRS (continued)
Equity-based compensation benefits (continued)
- 70 -
This will result in a change to the current accounting policy under which no expense is recognised for equity-based
compensation. The financial effect of these changes is in the process of being reviewed. Furthermore, CML is
considering the impact of AASB 2 on the non recourse loans provided to Directors to acquire shares in the
company.
(e) Financial instruments
For companies with a June financial year end, AASB 139 Financial Instruments: Recognition and Measurement,
applies from 1 July 2005, meaning that the comparative period of 2004 is not required to be restated unlike the
majority of other IFRS standards which require retrospective application. Under AASB 139 Financial
Instruments: Recognition and Measurement, financial instruments will be required to be classified into one of five
categories which will, in turn, determine the accounting treatment of the item. The classifications are loans and
receivables – measured at amortised cost; financial assets held to maturity – measured at amortised cost; financial
assets held for trading – measured at fair value with fair value changes charged to net profit or loss; financial
assets available for sale – measured at fair value with fair value changes taken to equity and non trading liabilities
– measured at amortised cost. This will result in a change in the current accounting policy that does not classify
financial instruments in this manner.The future financial effect of this change in accounting policy is currently
under review.
Derivatives
Under AASB 139, recognition and measurement of all derivative financial instruments at fair value is required.
Unless detailed hedge accounting requirements are met, movements in the fair value of derivative financial
instruments must be taken to the profit and loss statement.
AASB 139 also introduces the concept of embedded derivatives and requires the identification, recognition and
measurement of derivatives embedded within contracts that a company may enter. Embedded derivatives are
required to be measured at fair value and movements reported in the Statement of Financial Performance. CML is
continuing to review its contracts to determine whether any such embedded derivatives exist.
Hedge Accounting
Under AASB 139 Financial Instruments: Recognition and Measurement, in order to achieve a qualifying hedge,
the entity is required to meet the following criteria:
Identify the type of hedge as fair value or cash flow;
Identify the hedged item or transaction;
Identify the nature of the risk being hedged;
Identify the hedging instrument;
Demonstrate that the hedge has and will continue to be highly effective; and
Document the hedging relationship, including the risk management objectives and strategy for
undertaking the hedge and how effectiveness will be tested.
Under the current accounting policy unrealised exchange gains and losses on specific hedges at balance date are
deferred and recognised in the Statement of Financial Position and any unrealised exchange gains or losses on
general hedges are included in the Statement of Financial Performance. Reliable estimation of the future financial
effect of this change in accounting policy is continuing to be evaluated. CML is changing processes to continue to
meet the requirements for hedge accounting where applicable.
Convertible notes
During the 2005 financial year, the outstanding convertible notes were converted into equity. As the convertible
notes were treated as a liability and were outstanding at the date of transition to AIFRS the company is considering
the debt/equity classification in accordance with AASB 132 Financial Instruments: Disclosure and Presentation.
Consolidated Minerals Limited
Notes to the financial statements
30 June 2005
(continued)
Note 44. Impacts of adopting Australian equivalents to IFRS (continued)
- 71 -
(f) Provision for rehabilitation and decommissioning costs
Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the Company is required to recognise
the full provision for rehabilitation, based on discounted future cash flows, at the date of transition to AIFRS. A
corresponding rehabilitation asset will be created as at the date of transition. This asset will be depreciated using
the units of production basis over the life of the mine to which the future rehabilitation and decommissioning work
relates. At the date of transition of AIFRS, the financial effect of the adoption of this change in accounting
standard is anticipated to be a net of tax charge to retained earnings of $140,000.
(g) Exploration for and evaluation of mineral resources
AASB 6 Exploration for and Evaluation of Mineral Resources was released in December 2004. The standard
permits an entity to continue following their existing accounting policies for the treatment of exploration and
evaluation expenditures, which for CML embodies the principles of "areas of interest" accounting. Consequently,
CML does not anticipate any measurement impact in relation to exploration and evaluation costs upon
transitioning to AIFRS.
(h) Deferred expenditure
The company is currently considering the impact of AIFRS upon post production overburden removal and decline
development expenditure. The company's current policy is to separately capitalise the costs for each area of
interest and then amortise this expenditure on a units of production basis.
(i) Impairment of assets
Under AASB 136 Impairment of Assets, the recoverable amount of an asset is determined as the higher of net
selling price and value in use. This will result in a change in the current accounting policy which determines the
recoverable amount of an asset on the basis of discounted cash flows. Under the new policy it is likely that
impairment of assets will be recognised sooner, however there is not expected to be any impairment at the date of
transition to AIFRS, nor at the end of the financial year.
- 72 -
Consolidated Minerals Limited
Directors' declaration
30 June 2005
The Directors declare that the financial statements and notes set out on pages 15 to 71:
(a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(b) give a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and of their
performance, as represented by the results of their operations for the financial year ended on that date.
This declaration has been made after receiving the declarations required to be made to the directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ending 30 June 2005.
In the Directors' opinion:
(a) the financial statements and notes are in accordance with the Corporations Act 2001; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable.
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified
in note 39 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the
deed of cross guarantee.
This declaration is made in accordance with a resolution of the Directors.
Michael Kiernan - Managing Director
Perth, Western Australia
12 September 2005