20092009
Annual Report
Adelaide Resources
Limited
Adelaide Resources Limited2
Directors
Paul Dowd Non Executive Chairman Chris Drown Managing Director John Horan Non Executive Director and Company Secretary John den Dryver Non Executive Director Keith Yates Non Executive Director Andrew Brown Non Executive Director
Registered and Principal Office
69 King William RoadUnley, South Australia 5061
Contact Details
Phone: +61 8 8271 0600 Fax: +61 8 8271 0033 Postal: PO Box 1210, Unley BC, SA 5061 Email: [email protected] Website: www.adelaideresources.com.au
Share Registry
Computershare Investor Services Pty LimitedLevel 5, 115 Grenfell StreetAdelaide, South Australia 5000GPO Box 1903, Adelaide SA 5000Enquiries (within Australia) 1300 134 685Enquiries (outside Australia) +61 3 9415 4617
Auditors
Deloitte Touche Tohmatsu11 Waymouth StreetAdelaide, South Australia 5000
Solicitors
Kelly & Co. Lawyers Level 17, Westpac House 91 King William Street Adelaide, South Australia 5000
Bankers
BankSA97 King William StreetAdelaide, South Australia 5000
Stock Exchange Listing
Australian Stock Exchange LimitedHome Exchange: AdelaideASX code: ADN
ABN / ACN
75 061 503 375 / 061 503 375
The Company
Company ProfileAdelaide Resources Limited is a minerals exploration company based in Adelaide, South Australia.
The company has six directors who are all highly experienced in the minerals business. The Chairman, Paul J Dowd, and John den Dryver are mining engineers with substantial expertise in corporate management, feasibility studies and mine development. Managing Director, Chris Drown, and Keith Yates are both exploration geologists, while John Horan and Andrew Brown have extensive corporate and financial backgrounds at board level and in financing mining and minerals exploration.
A small staff is employed to manage exploration and administrative functions together with contract geologists and technicians to conduct field activities.
Since its public listing in 1996, Adelaide Resources’ exploration projects have been located in South Australia and the Northern Territory. The company’s current projects, located largely in the Gawler Craton SA, and the Tennant Creek area NT, involve the search for gold, copper, and uranium.
The company’s goal is to grow shareholder wealth through the discovery and development of mineral deposits.
2009 Annual Report 1
Highlights left
Company Profile left
Chairman’s Letter 2
Project Locations 2
Review of Operations 4
Schedule of Tenements 16
Corporate Governance 17
Statutory Reports 25
Directors’ Report 26
Auditor’s Independence Declaration 36
Income Statement 37
Balance Sheet 38
Statement of Recognised Income
and Expense 39
Consolidated Cash Flow Statement 40
Notes to Financial Statements 41
Directors’ Declaration 65
Independent Audit Report 66
Shareholder Information 68
Contents
Highlights
· Distribution of Iron Road
Limited securities successfully
unlocks significant value and
places this value directly in the
hands of shareholders.
· Sale of the Company’s
Eucla Basin Assets to Iluka
Resources Limited successfully
negotiated with proceeds of
$5 million in cash enabling
the company to continue an
active exploration program.
· Realignment of company
growth strategy following
Iron Road and Eucla Basin
divestments - strong forward
focus on gold, copper and
uranium.
· Highly significant exploration
results achieved at the Rover
Project with substantial copper
intersections at Rover 4, and
high grade copper-gold
intersections reported very
close to Adelaide Resources’
tenement by a neighbouring
explorer.
· Active South Australian
uranium exploration effort with
funding largely met by joint
venturers.
Adelaide Resources Limited2
Chairman’s Letter
Dear Shareholder,
It gives me great pleasure to report to you on the activities of Adelaide Resources Limited for the past year.
The 2008-09 financial year was one of challenging economic conditions and often negative equity markets occasioned by the global financial crisis. I am pleased to report that, despite these difficult conditions, Adelaide Resources is well positioned as we look to continue to grow shareholder wealth in the future.
As a shareholder in a Junior Explorer, you would
have had no expectation of your company
providing you with a dividend – indeed only
companies achieving profit can provide a
dividend. Nevertheless, while it continues to create
value from its prospective exploration assets, your
company has provided a return to shareholders
that if maximised in your hands, provided a reward
greater than many dividends. During the year the
company completed a pro-rata, in-specie, return
of capital to shareholders through the distribution
of Iron Road Limited shares and options it acquired
through the divestment of the Warramboo Iron
Project.
On 2 December 2008, Iron Road
Limited shares and options
were distributed to Adelaide
Resources’ shareholders
who were registered on 24
November.
Iron Road has performed
strongly in recent times and your
Board of Directors is delighted
that the Iron Road transaction
has achieved its goal of
unlocking significant value, to
a maximum of 27 cents per
Adelaide Resources share, for
the company’s shareholders.
In October 2008, Adelaide Resources announced
it had negotiated to sell its Eucla Basin assets,
including its share in the Colona Joint Venture, to
joint venturer Iluka Resources Limited. The decision
was taken after Iluka announced that it would
not proceed to a bankable feasibility study and
development of the Tripitaka deposit, located
partly on Colona Joint Venture tenements.
Consideration for the sale of the Eucla Basin assets
was $5 million, received in November 2008 at the
time when capital markets were at their most dire.
The Eucla asset sale placed the company in a
sound financial position allowing it to continue its
active exploration effort on behalf of shareholders.
Following the sale the company’s Board of Directors
revised its strategy for growth and resolved to
concentrate future efforts on the search for gold,
copper and uranium deposits.
NorthernTerritory
SouthAustralia
Victoria
ROVER
Gold/Copper
MOONTA
Copper/Gold/Uranium
ProjectLocations
CORROBINNIE
Uranium
CLEVE
Uranium
ANABAMA
Copper/Gold
GLENROY
Gold
Queensland
YALANDA
Uranium
EYRE PENINSULA
Gold/Uranium/Copper
332009 Annual Report
Chairman’s Letter
This revised strategy is now starting to bear fruit,
with a welcome positive reaction in the share price
of Adelaide Resources.
Management have long-held the view that the
extent and the quality of tenements within the
famously rich Tennant Creek District, in the Northern
Territory, provided a great opportunity for Adelaide
Resources and their passion and diligence is now
being rewarded. Exploration of the Rover Project,
located near Tennant Creek, has delivered highly
encouraging results with the announcement,
made after year end, of a substantial copper
intersection at the Rover 4 prospect. In the recent
past your directors have confirmed management’s
view that exploration in this highly gold-copper
prospective region has been steadily undergoing a
renaissance. We now take the view that the Rover/
Tennant Creek district represents one of the most
exciting destinations for gold-copper exploration
in Australia. We intend to continue a robust
exploration effort at Rover in the year ahead.
Another “exploration hotspot” has emerged on the
Yorke Peninsula of South Australia, where Adelaide
Resources holds the key Moonta-Wallaroo Project.
Competitor drilling at a prospect southeast of
Moonta-Wallaroo has delivered very attractive
copper intersections, while a comprehensive
review of historic exploration data from Adelaide
Resources’ Moonta-Wallaroo Project confirms the
presence of numerous copper-gold targets. We
look forward to exploring the best ranked of these
in 2010.
Rover has become a clear focus for the company
however we cannot ignore the high prospectivity
of our assets on the Yorke and Eyre Peninsulas.
Therefore, to maintain our focus and yet preserve
shareholders’ interests in these promising districts,
we have devised a strategy to facilitate a uranium
search effort principally funded by third parties.
Joint Venturer, Quasar Resources Pty Ltd, continues
to return encouraging results in the search for
sediment hosted uranium deposits in ancient river
systems on Eyre Peninsula. A second joint venture,
with Southern Uranium Limited and announced
after year end, will explore for uranium deposits on
the Yalanda Hill tenements located on the eastern
Eyre Peninsula of South Australia.
Most commodity prices were adversely affected by
the global financial crisis, but they retreated from
all-time high prices and remained at depressed
levels for only a brief period. The two commodities
of main focus for your company – gold and copper,
have enjoyed buoyant prices more recently and
in the opinion of your Directors, the ensuing year
may see further improvement in what are currently
attractive commodity prices.
While the past year has presented many
challenges, I am pleased that your company has
created significant value for shareholders, while
continuing to apply its talents to add further value
to its prospective asset base. It enters the new year
in a solid financial position, with a tight commodity
focus, and with a portfolio of highly regarded
exploration projects.
I look forward to bringing you news of further
positive developments in the coming year as we
pursue our goal of increasing shareholder wealth.
Paul J. Dowd
Chairman
Adelaide Resources Limited4
Introduction
Direct exploration expenditure for the year totalled
$1.506 million with additional contributions of $0.895
million from joint venturers holding or earning an
interest in certain joint ventures.
Corporately, the company completed two
important transactions during the year. It
completed the distribution of securities in Iron Road
Limited to shareholders and sold its interest in the
Colona Joint Venture, including a minority interest
in the Tripitaka zircon deposit, to Iluka Resources
Limited. These transactions leave the company
as a well funded and focussed gold, copper and
uranium explorer.
Exploration completed at the flagship Rover Gold-
Copper Project, located near Tennant Creek in the
Northern Territory, included detailed geophysical
surveying and drilling. A number of highly promising
copper and gold intersections were achieved at
the Rover 4 prospect. Westgold Resources Limited,
which is also exploring the Rover Field, announced
spectacular gold and copper intersections from
its Rover 1 prospect, with some mineralised zones
persisting to within a few metres from Adelaide
Resources’ tenements.
A re-evaluation of historical exploration data from
the Moonta Copper-Gold Project, located on the
Yorke Peninsula in South Australia, has identified
numerous copper-gold targets. Exploration to
advance the highest ranked of these targets is
planned, with drilling scheduled for early 2010.
Uranium exploration was conducted through a
joint venture with Quasar Resources Pty Ltd, with
programs of airborne electromagnetic surveying and
drilling completed. A drilling program exploring for
unconformity style uranium was conducted at the
Cleve Project, while a new joint venture with Southern
Uranium Limited to explore for uranium at Yalanda Hill
in South Australia was announced after year end.
Review of Operations
Forward Strategy
To achieve the goal of growing shareholder
wealth, Adelaide Resources’ directors have
formulated a company strategy comprising
the following key principles:
· The company will maintain a strong
commodity focus on gold, with copper
and uranium remaining as important, but
secondary, target metals. Directors believe
the outlook for gold is very positive and
is a commodity well suited to Adelaide
Resources. Copper’s properties ensure
that it will remain a vital metal, and it
occurs naturally with gold in several of
the company’s key projects. Uranium is
considered to have a strong future albeit
under a more burdensome regulatory
regime. The company’s current portfolio
of properties is well matched to this
commodity focus, however it will continue
to actively pursue new gold project
opportunities.
· The company remains in a sound financial
position allowing it to conduct financially
prudent programs of work that can deliver
value to shareholders. The company will
continue to complete exploration programs
that are both “meaningful and measured”.
· The company will continue its successful
strategy of using joint ventures to leverage
the value of its equity funds, particularly
with respect to its search for uranium.
Directors will also consider third party
involvement on any of the company’s
properties if the resulting deal delivers
greater opportunities for shareholders than
could be achieved through self funding.
552009 Annual Report
Corporate Transactions
In-Specie distribution of Iron Road Limited securities to Shareholders
In February 2008, Adelaide Resources announced it had
vended its Warramboo Iron Project to Iron Road Limited
for a consideration of 21 million Iron Road shares. Iron
Road Limited (IRD) was admitted to the Official List of the
Australian Securities Exchange on 10 June 2008.
On 8 August 2008 Iron Road announced a rights issue with
its shareholders able to purchase options to acquire further
shares in Iron Road. Adelaide Resources purchased its full
entitlement of 10.5 million options. The Iron Road Limited
Options (IRDO) have an exercise price 20 cents and are also
tradable on the ASX.
Following shareholder approval and the receipt of favourable rulings from the Australian Taxation
Office, Adelaide Resources distributed approximately 99% of its Iron Road Limited shares and options,
free of all costs, to its shareholders by way of a pro-rata in-specie return of capital.
Shareholders registered on 24 November 2008 received two Iron Road shares and one Iron Road
option for every eight Adelaide Resources shares held. The return of capital was completed on 2
December 2008, with shareholders then able to exercise their own authority in respect of their Iron
Road holdings.
The transaction has been a resounding success in unlocking value for Adelaide Resources
shareholders. Iron Road Limited has conducted well-conceived and highly competent exploration
programs at Warramboo, and on 7 August 2009 released its maiden JORC compliant resource
estimate for part of the deposit.
The share price of both Iron Road Limited shares and options has performed strongly in recent months.
The value unlocked for Adelaide Resources shareholders who participated in the distribution ranges
up to the equivalent of 27.1 cents per Adelaide Resources share.
Eucla Basin (Colona Joint Venture) asset sale
On 11 November 2008 Adelaide Resources announced it had completed the sale of its Eucla Basin
assets, including its minority share in the Colona Joint Venture, to joint venturer Iluka Resources Limited.
Consideration for the sale was $5 million in cash clear of all costs.
The decision to sell the mineral sand assets was strongly influenced by a number of factors, principal
of which were decisions taken by Iluka to develop its larger 100% owned Jacinth – Ambrosia project
and consequently not to progress to a definitive feasibility study of the Tripitaka zircon deposit, part of
which was located on Colona Joint Venture tenements.
The injection of cash into Adelaide Resources, at a time when global economic conditions were very
poor, allowed the company to position itself as a focussed gold-copper and uranium explorer and to
continue solid exploration efforts on its remaining projects on behalf of shareholders.
Review of Operations
Managing Director Chris Drown outside the Warramboo Post Office
6 Adelaide Resources Limited6
�KunayungkuOutstation
ELA 27292EL 7739
10 kilometres
Alice Springs
Darwin
Tennant Creek
ROVER PROJECT
�Tennant Creek
ST
UA
RT
HIG
HW
AY
Figure 1. Rover Project Locality
ADN tenementsEL 25512
Rover 4Prospect
Access track (approx. 85km)
Northern TerritoryLocation
Review of Operations
Rover – Gold/CopperAdelaide Resources holds a commanding ground
position in the Rover Field located 75 km south west
of Tennant Creek. The company’s wholly owned
Rover Project tenements secure the majority of the
area where “Tennant Creek style” iron-oxide hosted
gold-copper systems are confirmed to be present.
The 287 sq km project comprises two granted
exploration licences and one exploration licence
application (Figure 1). The project tenements were
acquired in 2005 from Newmont Gold Exploration
Pty Limited. In consideration for the purchase,
Newmont was granted a net smelter return royalty
on gold production ranging between 1.5% and
2.5% scaled to cumulative production and to the
prevailing gold price. Where the product is other
than gold, the royalty is 1.5%.
By foregoing the royalty, Newmont could
alternatively exercise a once only right to buy
back a 70% interest in the project on pre-agreed
terms in the event that 2 million or more ounces of
gold are discovered. The buy back right cannot
be triggered by the establishment of resources of
copper or other metals. In February 2009, Newmont
assigned its royalty/buy back interest to Franco-
Nevada Australia Pty Ltd.
Several of the historically mined gold and copper
ore bodies at Tennant Creek were of exceptional
grade and deposits of “Tennant Creek” style
represent very attractive exploration targets.
Geologists have long believed that the Rover
Field was conceptually prospective for deposits
with grade characteristics similar to the Tennant
Creek Field. Exploration completed by Adelaide
Resources and neighbouring explorer Westgold
Resources Limited at Rover has provided strong
empirical support for this concept.
The Rover Project remains a key part of the
company’s portfolio and offers the opportunity
of discovering a new mining district under cover.
It will remain the clear focus of the company’s
exploration activities in the year ahead.
Exploration Program
Exploration during the year comprised programs of
diamond drilling and detailed geophysical surveys,
including airborne magnetics and ground based
gravity surveying. Ground based activities required
the completion of site clearance surveys by the
Traditional Aboriginal Owners of the project area.
Geophysics
As the gold and copper prospective rocks in the
Rover Field are buried beneath barren cover
sediments, exploration is required to be largely
geophysically driven. Typical Tennant Creek/Rover
gold and copper deposits are hosted in dense,
often magnetite dominant, ironstone bodies. The
ironstones are in turn contained in generally non-
magnetic and less dense sediments. The physical
contrasts between the ironstone bodies and their
host sediments enables their potential detection
through the application of magnetic and gravity
geophysical surveys.
72009 Annual Report 7Review of Operations
In 2008, a helicopter-borne high resolution
magnetic survey was flown over almost the entire
Rover Project, with a total of 5710 line kilometres
flown on 50 metre spaced north-south lines
(Figure 2).
The helimag data has provided survey coverage of
all of the numerous magnetic anomalies present in
the Rover Project. The quality of the helimag data
is such that drillholes can be designed without the
requirement to first complete ground magnetic
surveys offering a new degree of flexibility in the
ongoing exploration program at Rover.
In 2009 a gravity survey was completed and
covered the majority of the area of the project
considered to be of highest prospectivity. In
total, 4607 gravity stations were read with stations
positioned using a 500 metre by 250 metre pattern
for regional coverage, reducing to a 200 metre by
100 metre detailed pattern over prospects.
Drilling
Diamond drilling was underway to test a number
of prospects at Rover, with a total of eight holes
completed for 3350 metres at the time of reporting.
Targets tested are shown on Figure 2 and include
3 holes at Rover 4, and single holes at each of
Rover 2, Rover 27, Rover 11 East, Rover 20 and
Rover 1 North.
The drillholes at Rover 2, Rover 27 and Rover 1 North
were completed in collaboration with the Northern
Territory Government as part of its “Bringing Forward
Discovery’ geophysical and drilling exploration
initiative, with the Government contributing
$100,000 towards the drilling costs.
Rover 4 Prospect
All three holes testing the Rover 4 prospect
have intersected significant intervals of
copper mineralisation, with encouraging gold
mineralisation also encountered in one hole.
Drillhole R4ARD20 was drilled in the eastern part
of the prospect (Figure 3). It intersected a long
interval of low grade copper and gold. A promising
interval of 9 metres at 1.57% Cu and 1.09g/t Au
commenced 228 metres downhole, while an
interval of 4 metres at 0.69% Cu and 2.29 g/t Au
was intersected from 310 metres.
R4ARD21 tested the prospect west of all previous
drilling (Figures 3 and 4). Magnetite-dominant
ironstone, containing significant copper sulphide
mineralisation, was intersected between 306 metres
and 352 metres downhole. This 46 metre interval
assays 1.24% copper. Sub-intervals of better grade
within the 46 metre zone include 23 metres at 1.63%
Cu from 306 metres, including 10 metres at 2.31%
Cu; and 3 metres at 2.73% Cu from 349 metres.
R1N
EL 7739ELA 27292
EL 25512
R2
R20
R1
R27
Prospect
R11ER4
TennantCreek
Magnetic Image
Adelaide
Resources
Tenements
Figure 2. Rover Project Helimag Survey
5 kilometres
8 Adelaide Resources Limited8Review of Operations
The magnetite-dominant nature of the host rock in
R4ARD21 is considered significant. This rock type is
closely analogous to the magnetite-rich lodes that
form the host to gold and copper mineralisation in
the Tennant Creek Field.
Drillhole R4ARD24 was drilled to follow-up the
magnetite-hosted copper intersection in R4ARD21,
and was drilled on the same section as the earlier
hole. R4ARD24 did not intersect any magnetite
but none the less encountered significant copper
mineralisation including 25 metres at 1.05% Cu from
295 metes downhole.
Table 1 lists all significant intersections returned from
the three Rover 4 drillholes.
The positive results from Rover 4 are an exciting
development for the Rover Project and the
company was undertaking follow-up drilling at the
time of reporting.
Other targets
Drill hole R11ARD19 tested the Rover 11 East target,
intersecting a magnetite-bearing lode. Copper
sulphides are visible throughout the lode with assay
results not yet at hand.
Drillholes at Rover 2 and Rover 27 both intersected
magnetite-bearing volcanic rocks at the respective
target depths which almost certainly account for
Table 1: Significant copper intersections - Rover 4 Prospect
Drillhole Name Easting Northing Dip Azimuth Final
DepthFrom (m)
To (m)
Interval (m)
Cu %
Au g/t
R4ARD20 360586 7789955 -62 176 426.3 219 220 1 1.17 0.06 228 236 9 1.57 1.09 including 235 236 1 6.32 0.63 258 260 2 0.5 2.16 264 265 1 1.32 0.02 310 314 4 0.69 2.30 including 311 312 1 1.58 5.83
R4ARD21 360300 7790155 -61 173 441.24 306 352 46 1.24 0.14 including 306 316 10 2.31 0.10 and 318 322 4 1.70 0.08 and 327 329 2 1.60 0.01 and 341 344 3 1.44 0.28 and 349 352 3 2.73 0.49 365 366 1 1.18 0.34 372 373 1 1.07 0.30 384 385 1 1.67 0.55
R4ARD24 360300 7789745 -62 355 549 287 288 1 1.13 0.03 295 320 25 1.05 0.05 including 295 304 9 1.66 0.02 377 378 1 3.60 0.11 383 384 1 0.10 1.32 394 395 1 0.34 1.18
Assays based on 1 metre cut half core samples of oriented NQ2 core. Core recovery for reported intervals is very high.
Cu determined by mixed acid digest followed by ICP-OES, Cu over 1% determined by AAS.
Au determined by nominal 50gm fire assay and AAS. Standards introduced at ratio of 1 in 20.
Intersections are downhole lengths with grades weighted for S.G. True widths are not known.
92009 Annual Report 9Review of Operations
the magnetic anomalies tested. Careful logging
and study of the core from these two prospects
is required to determine if any further work is
warranted.
The Rover 1 North target is a magnetic anomaly
located about 900 metres northwest of the Rover
1 prospect where Westgold Resources Limited
have discovered high grade gold and copper
mineralisation. Drillhole R1NARD22 intersected a
promising sequence of highly altered sediments
interpreted to belong to the Warramunga Group
which hosts all known mineralisation in the Rover
and Tennant Creek Fields.
Drilling of a fourth regional magnetic anomaly,
Rover 20, failed to intersect the likely source of the
magnetic anomaly.
Of potentially great significance to Adelaide
Resources were drill results announced after year
end by Westgold Resources Limited from its Rover
1 prospect, located immediately south of the
boundary of one of Adelaide Resources’ tenements
(Figure 2). High grade gold and copper is present
at Rover 1 with some of Westgold’s drill intersections
persisting to within a few metres of the tenement
boundary. There is clear potential for part of the
Rover 1 deposit to fall on Adelaide Resources’
ground.
The company intends to conduct an aggressive
exploration program at Rover in 2010.
441.24m
7790100mN7790000mN7789900mN
R4ARD24 R4ARD21
549.1m
Cover rocks
Host
sediments
35m @ 0.45%Cu( lterationComplex a )
50 metres
R4ARD25
25m @ 1.05%Cu( lterationComplex a )
46m @ 1.24%Cu(Magnetite ironstone)
360200mE 360600mE
7790000m
N7789000m
N
Section360300mE
100m
200m
300m
400m
EL 7739 EL 25512
2009 drillhole
Previous drillhole trace150 metres
Contours of
Total Magnetic Intensity
Hole inprogress
R4ARD21
R4ARD20(new assays)
R4ARD24(new assays)
Figure 4. Rover 4 Cross Section 360300mE
Figure 3. Rover 4 Drillhole Locations
10 Adelaide Resources Limited10Review of Operations
The Moonta region of the
Yorke Peninsula has been an
area of geological importance
for South Australia since 1861
when copper and gold were
first discovered there, and the
company’s Moonta Project
is a key asset. It is located
within the Olympic Copper-
Gold Province that hosts the
Prominent Hill and Olympic
Dam deposits, and also
exciting exploration prospects
such as Rex Minerals Limited’s
Hillside copper discovery,
located south of Adelaide
Resources’ tenement.
A detailed review of historical
exploration data from Moonta
has identified numerous gold-
copper targets (Figure 5), the highest ranked
of which are scheduled for exploration in late
2009/early 2010.
Exemplary of the highly ranked targets is the
Paskeville anomaly, located in the east of the
project tenement. The Paskeville anomaly is a large
(3.5 x 1.2km), coherent undrilled gold in calcrete
anomaly, with coincident anomalous copper and
silver. Planned work includes infill geochemical
sampling and bedrock RAB/aircore drilling.
The Willamulka Prospect, located in the northeast
of the project, represents a more advanced
target. Willamulka is a 2.3km long gold and
copper in calcrete anomaly tested by very limited
drilling (Figure 6). While only a modest number
of holes have been drilled in the past, significant
intersections of copper and gold, including
15 metres at 1.1% Cu from 8 metres, and a deeper
intersection of 10 metres at 0.50 g/t Au from
46 metres in the same drill hole, indicate that the
prospect has significant remaining potential.
5 kilometres
Melton
Willamulka
Paskeville
Moonta Porphyry
Joint Venture area
Gold/Copper anomaly
Moonta Project
EL 3733
Wallaroo
Kadina
Paskeville
MoontaCunliffeYelta
EL 3733
Figure 5. Moonta Project – Gold/Copper anomalies
Moonta – Gold/Copper
Previous drilling
Figure 6.
Willamulka Prospect –showing gold anomalyand previous drilling
Adelaide Resources holds 100
percent equity in the majority of
Exploration Licence 3733. That part
of the tenement subject to the
Moonta Porphyry Joint Venture,
with Breakaway Resources Limited,
is owned 90 percent by Adelaide
Resources. The company has an
option to acquire Breakaway’s
residual 10 percent interest.
112009 Annual Report 11
The company holds a substantial ground
position on the Eyre Peninsula of South
Australia (Figure 7). That part of the tenement
package not subject to the Corrobinnie
Palaeochannel Uranium Joint Venture totals
3860 sq km. The area is prospective for gold,
uranium and copper deposits.
The project includes the Barns, Baggy Green
and White Tank gold discoveries, while
numerous other gold prospects and targets
remain to be evaluated. The company has
also discovered uranium mineralisation at the
Ulysses and KO11S prospects.
The Empire copper target (Figure 8) has one
of the highest magnitude copper
geochemical anomalies in the Gawler
Craton. Previous drilling at Empire has failed
to discover the source of the geochemical
anomaly but has returned encouraging
signs that mineralisation may be present
in the area, including the presence of
hydrothermally altered rocks with anomalous
copper, gold and silver values.
During the year a 72.8 line kilometre airborne
electromagnetic (EM) survey was flown over the
Empire prospect to explore for bedrock conductive
features that could signal the location of the
mineralised source to the geochemical anomaly.
Interpretation of the airborne EM survey data
has confirmed that bedrock conductors may be
present in the vicinity of the geochemical anomaly.
The EM feature of most interest (Target 1) has not
yet been drill tested.
Adelaide Resources has determined to pursue
joint venture or alternative funding arrangements
to progress this large project, and discussions with
potential joint venturers were underway at the time
of reporting.
Eyre Peninsula – Gold/Copper/Uranium
Lake
Acraman
Poochera
Wudinna
Kimba
30 kilometres
Lake
Gairdner
Adelaide Resources 100%
(Quasar earning 60%
of Palaeochannel U)
Prospect/anomaly
Adelaide Resources
Tenements
Adelaide Resources 90%
(option to acquire 100%)
Adelaide Resources 100%
Barns/White Tank
Empire
BaggyGreen
Figure 7. Eyre Peninsula Project
Ulysses KO11S
Figure 8. Empire Prospect – RepTEM image
Target 2
Target 1
Calcrete anomaly
(Copper)
Adelaide Resources drillhole
Historic drillhole1000 Metres
Review of Operations
12 Adelaide Resources Limited12Review of Operations
An application for a new EPM (Exploration Permit
Minerals) was lodged in May with Queensland’s
Department of Mines and Energy covering
prospective ground on the northern margin of the
Drummond Basin (Figure 9). The application marks
the start of an initiative to build a new gold project
in this prospective region.
Exploration Licence 3816, located south of Olary
in South Australia (Figure 10), is prospective for
hydrothermal granite related copper-gold deposits.
The Blue Rose prospect, owned by a competitor
in an adjacent tenement, has returned drill
intersections such as 46 metres at 2.2% Cu and
0.8 g/t Au from shallow depths in weathered rock.
In 2007 Adelaide Resources
discovered copper mineralisation
at a prospect named Dark Horse.
Intersections included 40 metres
at 0.2% Cu, including 6 metres at
0.57% Cu and 0.25% Zn. Surficial
gossanous material at Dark Horse
can be traced for over 3 kilometres
suggesting a sizable sulphide-
bearing system is present.
During the year the company
completed a trial surface
geochemistry survey at Dark
Horse utilising a portable XRF
analytical instrument. The survey
identified some copper anomalous
samples, however was hampered
by the relatively high minimum
detection limit of the XRF instrument, and by the
likely presence of transported cover materials
in some areas of the prospect which mask any
geochemical response.
The company is seeking to attract a joint venturer
to continue exploration of the Anabama Project.
Glenroy – Gold Anabama – Copper
LOLWORTH -
RAVENSWOOD BLOCK
DRUMMOND
BASIN
ANAKIE INLIER
TownsvilleChartersTowers
Cairns
Brisbane
MountIsa
Longreach
Mackay
LakeDalrymple
EPMA 18090 "Glenroy"
Pajingo Field
Vera-Nancy
MileLimeyDamBreccia
Hill
Two
QueenslandLocation
GLENROY
Gold prospect
15 kilometres
Figure 9. Glenroy tenement location
The ground secured has potential to host
epithermal gold-silver mineralisation of a style
similar to the Vera-Nancy deposit, located west
of Glenroy and close to the northern limit of the
Drummond Basin.
Previous exploration completed on the Glenroy
tenement recorded widespread gold anomalism
associated with well developed epithermal veining,
alteration and brecciation.
The company has commenced construction of
a geological database for the region including
Glenroy. Granting of the tenement is anticipated
sometime in the first half of 2010 after which on
ground exploration activities can commence.
Barrier
Highway
Figure 10.
Anabama Project location
“Wadnaminga HS”“Devonborough Downs HS”
“Taltabooka HS”
“Eringa Park HS”
“Wiawera HS”
Blue RoseProspect
Olary
EL 3816 (Olary)
10 kilometres
Dark Horse
132009 Annual Report 13
This joint venture with Quasar Resources Pty
Ltd is exploring for uranium hosted in three
Tertiary palaeochannel systems within Adelaide
Resources’ Eyre Peninsula tenement holding
(Figure 11). The joint venture agreement
allows Quasar to earn a 60% interest in 5265
sq km of cover sediments containing the
palaeochannels, and 60% interest over minerals
in the basement in a smaller area, by spending
$3 million over a four year period commencing
1 January 2007. Quasar is required to spend at
least $750,000 per year on exploration.
Quasar is an affiliate of Heathgate Resources
Pty Ltd which operates the Beverley in-situ
leach uranium mine in South Australia, and
discovered the impressive Four Mile uranium
deposit in 2005.
During the year the joint venture flew a 1667
line kilometre airborne electro-magnetic (EM)
survey over the Narlaby Palaeochannel. The
survey data delineates the architecture of the
Narlaby palaeochannel which stands out as a
northwest trending conductivity feature.
A 55 hole, 3469 metre, drilling program
was conducted in the Narlaby channel in late
December 2008, with drill traverse locations
positioned following review of data from the
airborne EM survey (Figure 12).
The drilling program showed that an unbound
radiogenic zone, first identified in drillholes
completed in the Joint Venture’s 2007 drilling
program, extends at least 600 metres to the north
west.
The radiogenic anomaly was seen in two adjacent
2008 holes, PD062 and PD063, which intersected
maximum values of 104 and 97 ppm eU3O8
respectively. 2007 drillholes, PD020 and PD023,
drilled on a traverse located 600 metres south east
of the recent holes, intersected maximum values of
115 and 128 ppm eU3O8. (eU3O8 is an estimate of
uranium oxide concentration based upon gamma
log data).
At the time of reporting, an aircore drilling program
had just commenced to search for uranium in the
Thurlga palaeochannel. The significant extent of the
Thurlga palaeochannel has only been recognised in
the last few years and it has remained unexplored
for uranium until now. The drilling program will
determine the oxidation state of channel fill
sediments and drill samples will be submitted for
analysis to determine if uranium is present.
Corrobinnie Palaeochannel – Uranium
Lake
Acraman
Poochera
Wudinna
Kimba
30 kilometresYANINEE
NARLABY
THURLGA
Lake
Gairdner
Adelaide Resources 100%
(Quasar earning 60%
of Palaeochannel U)
Adelaide Resources
Tenements
Tertiary Palaeochannel
Figure 11. Corrobinnie Palaeochannel Project
Quasar earning 60%
of entirety
AEM SurveyArea
AEM Image
10 kilometres
45m RL
SeeFig.8
Empire
Prospect
Figure 12. Location of AEM Survey
New tributary
2007 drill traverse2008 drill traverse
Review of Operations
14 Adelaide Resources Limited14Review of Operations
On 10 September 2009 the company announced
that wholly owned subsidiary Eyre Energy Pty Ltd
had formed the Yalanda Hill Joint Venture with
Southern Uranium Limited (ASX Code: SNU). The
Joint Venture will explore principally for uranium
on EL 3473 and adjacent Exploration Licence
Applications 116/09 and 144/09 (Figure 13).
The main terms of the Yalanda Hill Joint Venture are
as follows:
· The initial joint venture interests shall be Eyre
Energy 60%, Southern Uranium 40%.
· Southern Uranium can increase its equity to 60%
through the expenditure of $250,000 over two
years.
· Once Southern Uranium
has earned 60% equity,
each party may contribute
to ongoing expenditure in
accordance with its equity, or
else elect to dilute.
· Southern Uranium will act as
Joint Venture Manager and
will plan and execute all
exploration programs.
· Southern Uranium may
withdraw from the Joint
Venture prior to spending
$250,000 as long as it has
met minimum statutory
expenditure requirements.
Upon withdrawal, Eyre
Energy would acquire 100%
of the three Joint Venture
tenements.
· If a party’s equity falls below 5% it will be
deemed to have withdrawn from the Joint
Venture.
The Joint Venture includes provisions for one party
to sole fund feasibility studies, and potentially also
mine development, in the event the other party
does not wish to participate.
Previous exploration in the Yalanda Hill area has
identified significant uranium potential. Adelaide
Resources prospected and rock chip sampled
a number of coincident uranium and thorium
anomalies evident in an airborne radiometric
survey flown in the 1990s. This work confirmed the
widespread presence of uranium in the area, with
assays on individual rock chip samples ranging up
to a maximum of 0.23% uranium.
Southern Uranium has been actively exploring
on tenements adjacent to the Yalanda Hill Joint
Venture licences, and is the first exploration
company to apply systematic soil geochemistry
to search for uranium in the district. Southern
Uranium’s geochemical approach has proven
highly promising with the identification of numerous
uranium anomalies, some of which may persist onto
the Yalanda Hill Joint Venture tenements.
Yalanda Hill Joint Venture – Uranium
The Joint Venture is planning an initial program
of blanket multi-element soil geochemistry,
complemented by gravity surveys. Exploration
will commence on granted Exploration Licence
3473 and progress to the exploration licence
applications once granted.
Figure 13. Location of the Yalanda Hill Joint Venture
Yalanda Hill
Joint Venture Area
Southern Uranium
Tenements 100%
Adelaide Resources
Tenement
Uranium soil
geochemical anomaly
Uranium channel
radiometric anomaly
15 kilometres
Kimba
EL 3473
ELA 116/09
ELA
144/09
ELA 144/09
ELA 144/09
152009 Annual Report 15
During the year a 45 hole, 1332 metre, RAB/aircore
drilling program was completed to search for
unconformity style uranium mineralisation on the
Cleve tenement, located on south-eastern Eyre
Peninsula in South Australia.
Drillholes were completed on six 500-metre spaced
traverses with holes nominally spaced 150 metres
apart along traverses at a conceptual target
called “Target B” (see Figure 14). At Target B, a
fault is interpreted to displace potential basement
host lithologies beneath unconformably overlying
conglomerates and sandstones.
The drilling program proved the validity of the
conceptual model confirming the presence of
the unconformity and of potentially attractive
host rocks including iron formations and graphite-
bearing schist in the basement.
Analysis of the drill samples returned weakly
anomalous uranium in two holes, with the best
result being 1 metre at 54.1 ppm uranium (60.5 ppm
U3O8) from a downhole depth of 8 metres in hole
CL001. The uranium anomaly in CL001 occurs at
the interpreted unconformity between overlying
quartz pebble conglomerate and basement iron
formation.
The company is seeking a joint venturer to explore
other uranium and gold targets present on the
tenement.
In late 2008 the company commenced an initiative
to identify projects for possible acquisition to
complement its existing property portfolio and
to maintain a pipeline of high quality exploration
properties.
The company is seeking a high quality gold
project located either in Australia or overseas. In
its search, the company is guided by the principle
that any new project must significantly improve
the company’s portfolio of properties, and ideally
will expose shareholders to a potential future mine
development.
To date numerous opportunities have been
assessed. The majority of these properties have
been located in Australia, with a small number of
overseas projects also reviewed.
The generative initiative has so far resulted in the
pegging of the 100% owned Glenroy property
located in Queensland, which is described
elsewhere in this report. The generative effort is
planned to continue in 2009/10.
Cleve – Uranium Property Generation
1000 metres
Cleve
T1
T2
T3
T4
T5
T6
PACE funded drillhole
Target B
PotentialHost Sequence
Fault
Fault
CL001
Magnetic image
Figure 14.
Location of 2009 PACEDrilling Program, Cleve
The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Chris Drown, who is a Member of The Australasian Institute of Mining and Metallurgy and who consults to the company on a full time basis. Mr Drown has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Drown consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Adelaide Resources Limited161616 Adelaide Resources Limited
Schedule of Tenements
* These tenements were transferred to Eyre Energy Pty Ltd on 1 July 2007. EL = Exploration Licence - Granted ELA = Exploration Licence - Application SELA = Substitute Exploration Licence - Application EPMA = Exploration Permit Minerals - Application
Project Tenement Area km2 Registered holder or applicant Nature of Company’s Interest %
South Australia
Eyre Peninsula Uranium Joint Venture*
EL 3296 42 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60% - cover only)
EL 3501 (Part) 768 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 3546 792 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 3700 106 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 3705 700 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60% - cover only)
EL 3743 184 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60% - cover only)
EL 3833 (Part) 348 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 3833 (Part) 1281 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60% - cover only)
EL 4145 139 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 4163 169 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 4191 (Part) 64 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 4214 186 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
EL 4263 332 Eyre Energy Pty Ltd 100 (Quasar Resources Pty Ltd earning 60%)
Eyre Peninsula Project*
EL 3473 425 Eyre Energy Pty Ltd and Olliver Geological Services
90 - option to acquire 100 from Olliver Geological Services Pty Ltd
EL 3501 (Part) 286 Eyre Energy Pty Ltd 100
EL 3564 220 Eyre Energy Pty Ltd 100
EL 3833 (Part) 730 Eyre Energy Pty Ltd 100
EL 3834 232 Eyre Energy Pty Ltd and Olliver Geological Services
90 - option to acquire 100 from Olliver Geological Services Pty Ltd
EL 4186 256 Eyre Energy Pty Ltd 100
EL 4191 (Part) 162 Eyre Energy Pty Ltd 100
Moonta Project*
EL 3733 767 Eyre Energy Pty Ltd 100
EL 3733 106 Eyre Energy Pty Ltd 90 - option to acquire 100 from Breakaway Resources Limited
Anabama Project EL 3816 176 Adelaide Exploration Pty Ltd 100
Northern Territory
Rover Project
EL 7739 242 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)
EL 25512 6 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)
ELA 27292 39 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)
SELA 27372 248 Adelaide Exploration Pty Ltd 100 (Franco-Nevada retain 70% buyback right)
Queensland
Drummond Basin Project EPMA 18090 196 Adelaide Exploration Pty Ltd 100
as at 30 June 2009
2009 Annual Report 17
CorporateGovernance
BOARD OF DIRECTORS
The Board of Directors has responsibility for the
overall corporate governance of the company
including strategic direction, establishment of goals
for management, and monitoring the achievement
of those goals.
The directors are aware of their duties and
responsibilities and subscribe to the Code of
Conduct of the Australian Institute of Company
Directors (see www.companydirectors.com.au).
They recognise that their primary responsibility is to
the owners of the company, its shareholders, while
simultaneously having regard for the interests of
all stakeholders of the company and the broader
community.
The Board’s primary role is the protection and
enhancement of long term shareholder value.
The Board’s policy is to review its performance
and composition on a regular basis to ensure that
there is an appropriate balance of experience
and skills to match the size, scope and nature of
the company’s activities. When a vacancy arises,
for whatever reason, or where it is considered the
Board would benefit from the appointment of a
director with particular skills and experience, the
Board’s policy is to select potential candidates,
with advice from an external consultant if
necessary. The most suitable candidate is then
appointed, subject to election at the next general
meeting of shareholders.
The Board currently aims to meet at least every two
months. In addition, strategy meetings and special
meetings are held at such other times as may be
necessary to address specific significant matters
that may arise.
The directors consider, on an ongoing basis, how
management information is presented to them and
whether such information is sufficient to enable
them to discharge their duties as directors of the
company.
Remuneration
The Board of Directors recognises that the
performance of the company depends on the
quality of its directors and other key management
personnel and, therefore, it must attract, motivate
and retain appropriately qualified industry
personnel.
The remuneration of executive and non
executive directors is reviewed by the Board with
the exclusion of the director concerned. The
remuneration of management and employees
is reviewed by the Board and approved by the
managing director.
Remuneration levels are determined by the
Board on an individual basis, at reasonable but
competitive market rates, with the size of the
company making individual assessment more
appropriate than formal remuneration policies.
The Board’s policy for non executive directors is
to set remuneration at a level which provides the
company with the ability to attract and retain
directors of the highest calibre, whilst incurring a
cost which is appropriate at the prevailing stage of
the company’s development.
The Board endeavours to reward the managing
director with a level and mix of remuneration
commensurate with his position and responsibilities
Adelaide Resources Limited has consistently
supported the principles of effective corporate
governance since the company’s inception
and is committed to adopting the highest
standards of performance and accountability,
commensurate with the size of the company
and its available resources.
The following statement outlines the principal
governance practices which the company
currently has established.
18 Adelaide Resources Limited18
within the company. This is designed to align the
interests of the managing director with those of
shareholders; to link reward with the strategic goals
and performance of the company; and to ensure
that the total remuneration is competitive by
market standards.
The remuneration of directors and other key
management personnel is not dependent on the
satisfaction of a performance condition when
granting options. In determining share options
to be granted to directors or key management
personnel, the pricing of the options is not
dependent upon the satisfaction of a performance
condition.
Options issued to directors are issued only after
shareholder approval, and with an exercise
price above the prevailing market price of the
company’s shares at the date of issue. Options
issued to other key management personnel are
issued with the exercise price being not less than
that calculated in accordance with the rules of
the shareholder approved Employee Share Option
Plan.
The directors have decided that the exclusion
of performance conditions is appropriate, after
consideration of comparable industry practice.
Independent external advice on remuneration
matters is sought whenever it is deemed necessary.
Independent Professional Advice
Directors have the right, in connection with their
duties and responsibilities, to seek independent
professional advice at the company’s expense.
Prior written approval of the chairman is required,
which approval will not be unreasonably withheld.
Committees
The Board has established an audit committee
of two non executive, independent directors,
and may increase the size of this committee, and
establish other committees, at the appropriate time
in the company’s development.
The company does not have formally constituted
nomination or remuneration committees. It is not
of a size, nor is its affairs of such complexity, to
justify formation of a range of separate or special
committees.
The Board as a whole addresses the governance
aspects of the full scope of the company’s
activities to ensure that it adheres to appropriate
ethical standards. Currently all matters which
might properly be dealt with by certain special
committees are subject to regular scrutiny at full
Board meetings.
SECURITIES TRADING
The company has a Securities Trading Policy
which prohibits trading in its securities by directors,
employees, contractors, or their close associates
during defined periods related to the date of
an announcement to the Australian Securities
Exchange of any price sensitive information.
This policy also requires directors, employees,
contractors and their close associates not to
trade in the company’s securities when they are in
possession of any relevant information that could
affect the company’s share price and which is not
available to the investing public.
Corporate Governance
192009 Annual Report 19
SHAREHOLDERS
The Board places a high priority on communicating
effectively with the company’s shareholders,
and has a shareholder communication policy
particularly for disclosure of information on
important corporate activities or proposals.
This disclosure is through regular shareholder
communications, including the annual report
(mailed to shareholders when requested),
quarterly reports mailed to shareholders, the
company’s website and the distribution of specific
announcements covering major transactions or
events. Directors believe these arrangements are
both effective and, importantly, flexible enough to
meet shareholders’ needs and expectations.
Shareholders are encouraged to exercise their right
to vote, either by attending shareholders’ meetings,
or by lodging a proxy. The company’s external
auditors and legal advisors attend all shareholders’
meetings.
CONTINUOUS DISCLOSURE
The Board is acutely aware of the continuous
disclosure regime and the company has a
Continuous Disclosure Policy to address all
necessary disclosure issues and adequate
corporate compliance.
The Policy, and accompanying procedures,
covers the continuous disclosure requirements
of the Australian Securities Exchange and the
Australian Securities and Investments Commission
in accordance with the Corporations Act 2001.
It also includes the company’s procedures on
information disclosure to external parties including
stockbrokers, analysts, the media and importantly,
its shareholders.
BUSINESS RISK
Management of the company’s risk is a high priority
for the Board of directors.
The directors recognise that mineral exploration is
an inherently risky business and that the operational
strategies adopted should, notwithstanding,
be directed towards increasing the net worth of the
company.
Although the company does not have formalised
policies on risk management, the Board is aware of
its responsibility for identifying areas of significant
business risk and for ensuring that arrangements are
in place to adequately manage these risks. This
issue is regularly reviewed at Board meetings and
risk management culture is encouraged amongst
employees and contractors.
Determined areas of risk which are regularly
considered include:
• performanceandfundingofexploration
activities
• budgetcontrolandassetprotection
• internalcomplianceandcontrolsystems
• statusofmineraltenements
• landaccessandnativetitleconsiderations
• compliancewithgovernmentlawsand
regulations
• occupationalhealthandsafety,andthe
environment
• continuousdisclosureobligations
The Board, with the assistance of its external
auditors, has instigated internal procedures
designed to provide reasonable assurance as to
the effectiveness and efficiency of operations, the
reliability of financial reporting, and compliance
with relevant laws and regulations.
Additionally, the Board receives regular advice
from the managing director and the designated
chief financial officer on internal control and risk
management, and a declaration from them in
accordance with section 295A of the Corporations
Act on the integrity of the company’s financial
statements.
Corporate Governance
20 Adelaide Resources Limited20
EXTERNAL AUDITORS
The company uses the services of a major audit
firm, Deloitte Touche Tohmatsu. The auditors attend
all shareholder meetings and have access to the
company’s directors at all times. Rotation of the
external audit engagement partner occurs every
five years.
CODE OF CONDUCT
The Board has established a Corporate Code of
Conduct whereby all directors, employees and
contractors are expected to observe the highest
ethical standards and act with the utmost integrity
and objectivity in their dealings with other parties.
They are expected to strive at all times to enhance
the reputation and performance of the company,
particularly in the communities in which it operates.
INDIGENOUS PEOPLE
The company has an Indigenous Peoples Policy
aimed at fostering a trusting, respectful and co-
operative relationship with indigenous people who
may have interests in areas where the company
operates. In striving for this objective it endeavours
to generate frank and open communication with
indigenous people and their advisors.
ENVIRONMENT
The company recognises the importance of sound
environmental practice. It has an Environmental
Policy which promotes environmental awareness
by all of its employees and contractors, with the
objective of achieving the highest standards of
environmental management by complying with
and, where possible, exceeding government
requirements.
The Policy encourages transparency in regard to
environmental performance and a commitment to
continuous improvement of practices.
WEBSITE INFORMATION
A copy of the company’s Corporate Governance
Statement in the Annual Report, together with
the company’s policies on continuous disclosure,
share trading, shareholder communication, the
environment, and indigenous people, is listed on
the company’s website.
The company’s code of conduct and its audit
committee charter are also disclosed on the
website.
Interested parties may refer to the website or,
alternatively, request the same information by
contacting the company.
Website: www.adelaideresources.com.au.
Corporate Governance
212009 Annual Report 21
THE CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS
The Board continues to review its corporate governance practices in light of the Australian Securities
Exchange (ASX) Corporate Governance Council’s Principles and Recommendations.
The following table sets out the company’s present position with regard to the adoption of these Principles.
(A = Adopted, N/A = Not Adopted)
ASX Principle Status Reference / Comment
Principle 1 : Lay solid foundations for management and oversight1.1 Companies should establish the functions
reserved to the board and those delegated to senior executives and disclose those functions.
A Matters reserved to the board are included on the company’s website.
1.2 Companies should disclose the process for evaluating the performance of senior executives.
A The process of evaluating the performance of senior executives is disclosed in the Corporate Governance Statement in the company’s annual report and on the website.
1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.
A
Principle 2 : Structure the board to add value2.1 A majority of the board should be
independent directors.N/A The board comprises six directors, two of
whom are independent (including the chairman).
2.2 The chair should be an independent director. A
2.3 The roles of chair and chief executive officer should not be exercised by the same individual.
A The position(s) of chairman and managing director are held by separate persons.
2.4 The board should establish a nomination committee.
N/A The board has no formal nomination committee. Acting in its ordinary capacity from time to time as required, the board carries out the process of determining the need for screening and appointing new directors. In view of its size and the resources available to the company, it is not considered that a separate nomination committee would add any substance to the process.
2.5 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.
A. The process for the performance evaluation of the board and individual directors is disclosed in the Corporate Governance Statement in the company’s annual report and on its website. Additionally, the chairman has implemented an annual review process whereby each director assesses the performance of individual directors and of the board as a whole.
2.6 Companies should provide the information indicated in the Guide to reporting on Principle 2.
A The skills and experience of directors are set out in the company’s annual report and on its website.
Corporate Governance
22 Adelaide Resources Limited22
Principle 3 : Promote ethical and responsible decision-making3.1 Companies should establish a code of
conduct and disclose the code or a summary of the code as to:
• the practices necessary to maintain confidence in the company’s integrity.
• the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders.
• the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
A The company has formulated a code of conduct which can be viewed on the company’s website.
3.2 Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy.
A The company has formulated a securities trading policy which can be viewed on the company’s website.
3.3 Companies should provide the information indicated in the Guide to reporting on Principle 3.
A
Principle 4 : Safeguard integrity in financial reporting4.1 The board should establish an audit
committee.A
4.2 The audit committee should be structured so that it:
• consists only of non executive directors
• consists of a majority of independent directors
• is chaired by an independent chair, who is not chair of the board
• has at least three members.
A
ü
ü
ü
N/A
The company has a functional two-member committee at present. This may be increased to three members if deemed appropriate by the board, given the size of the company and the nature of any expanding activity.
4.3 The audit committee should have a formal charter.
A The company has formulated an audit committee charter which can be viewed on the company’s website.
4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4.
A
Principle 5 : Make timely and balanced disclosure5.1 Companies should establish written policies
designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.
A The company has instigated internal procedures designed to provide reasonable assurance as to the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with relevant laws and regulations. The board is acutely aware of the continuous disclosure regime and there are strong informal systems in place to ensure compliance, underpinned by experience.
Corporate Governance
ASX Principle Status Reference / Comment
232009 Annual Report 23
5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5.
A The board receives regular updates on the status of the company’s activities and any new or proposed activities. Disclosure is reviewed as a routine agenda item at each board meeting.
Principle 6 : Respect the rights of shareholders6.1 Companies should design a communications
policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.
A In line with adherence to continuous disclosure requirements of ASX, all shareholders are kept informed of major developments affecting the company. This disclosure is through regular shareholder communications including annual reports, half-yearly reports, quarterly reports, the company website and the distribution of specific releases covering major transactions and events or other price sensitive information.
6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6.
A The company has formulated a shareholder communication policy as part of the Corporate Governance Statement which can be viewed on the company’s website.
Principle 7 : Recognise and manage risk7.1 Companies should establish policies for the
oversight and management of material business risks and disclose a summary of those policies.
A While the company does not have formalised policies on risk management, the board recognises its responsibility for identifying areas of significant business risk and for ensuring that arrangements are in place for adequately managing these risks. This issue is regularly reviewed at board meetings and risk management culture is encouraged amongst employees and contractors. Determined areas of risk which are regularly considered include:
• Performance and funding of exploration activities
• Budget control and asset protection
• Status of mineral tenements
• Land access and native title considerations
• Compliance with government laws and regulations
• Safety and the environment
• Continuous disclosure obligations
• Sovereign risk
• Share market conditions
• Economic risk
Corporate Governance
ASX Principle Status Reference / Comment
24 Adelaide Resources Limited24
7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.
N/A While the company does not have formalised policies on risk management, it recognises its responsibility for identifying areas of significant business risk and for ensuring that arrangements are in place for adequately managing these risks. This issue is regularly reviewed at board meetings and risk management culture is encouraged amongst employees and contractors.
Management is currently refining the company’s risk management and internal control system for review by the audit committee prior to implementation by the board.
7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with Section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.
A
7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7.
N/A
Principle 8 : Remunerate fairly and responsibly8.1 The board should establish a remuneration
committee.N/A The board does not have a formalised
remuneration committee. Remuneration matters are dealt with by the full board and are noted in the Corporate Governance Statement in the company’s annual report and on its website.
8.2 Companies should clearly distinguish the structure of non executive directors’ remuneration from that of executive directors and senior executives.
A
8.3 Companies should provide the information indicated in the Guide to reporting on Principle 8.
A Refer to the remuneration report in the company’s annual report.
Corporate Governance
ASX Principle Status Reference / Comment
25252009 Annual Report
Directors’ Report 26
Auditor’s Independence Declaration 36
Income Statement 37
Balance Sheet 38
Statement of Recognised Income
and Expense 39
Consolidated Cash Flow Statement 40
Notes to Financial Statements 41
Directors’ Declaration 65
Independent Audit Report 66
StatutoryReports
26 Adelaide Resources Limited26
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Directors’ Report
The directors present this directors’ report and the attached annual financial report of Adelaide Resources Limited for the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:
Directors
The names and details of the directors of the company during or since the end of the financial year are:
Paul J Dowd BSc (Eng), FAusIMM – Chairman
Paul Dowd is a mining engineer and has a professional mining career spanning more than 40 years, primarily in the private sector, but also in the public sector as head of the Victorian Mines and Petroleum Departments during the Kennett State Government.
In 2006 he resigned from the position of managing director of Newmont Australia Limited and vice president Australia and New Zealand Operations. Prior to the merger with Newmont and Franco-Nevada, he was group executive – operations for Normandy Mining Limited with responsibility for the group’s global managed mining interests, including eight Australian operations and four spread over Africa, Europe and Asia.
Mr Dowd is the managing director of Phoenix Copper Limited, chairman of the Board of RESA (the South Australian Resources & Engineering Skills Alliance), chairman of RESIC (the Resources Sector Infrastructure Council of South Australia), a non executive director of OZ Minerals Limited, a non executive director of Northgate Minerals Corporation (Canada) and its wholly owned Australian subsidiaries. He is a council member of the Parsons Brinkerhoff Australia Pacific Advisory Board. He also serves as an advisory councillor for SAMPEG – South Australian Minerals and Petroleum Expert Group, and is a member of advisory councils of CSIRO (MRSAC) and the University of Queensland – Sustainable Minerals Institute.
Mr Dowd is also a commissioner for the SA Training and Skills Commission (TaSC) and an advisory member – Aboriginal Workforce Development Inter-Ministerial Committee, Government of South Australia.
Christopher G Drown BSc (Hons), MAusIMM, MAICD – Managing Director
Chris Drown is a geologist with over 20 years experience in the Australian exploration and mining industry. He is a member of the Australasian Institute of Mining and Metallurgy, a member of the Australian Institute of Company Directors, and a member of the Geological Society of Australia.
A graduate of the University of Tasmania, Mr Drown worked in underground nickel mines at Western Mining Corporation Limited’s Kambalda operations in Western Australia, and filled mining geology roles at Aberfoyle Resources Limited’s Hellyer lead-zinc-silver deposit in western Tasmania.
In 1991, he moved from mine geology into exploration searching for base metal and gold deposits in the Northern Territory and South Australia.
Mr Drown was appointed exploration manager of Adelaide Resources shortly after it listed on the Australian Securities Exchange (ASX) and has since played a major role in the company’s activities. In March 2005 he accepted an invitation to join the Board of Adelaide Resources as an executive director and in November 2007 was appointed Managing Director.
John P Horan FCPA, FCIS – Non Executive Director and Company Secretary
John Horan is a Fellow of the Australian Society of Certified Practising Accountants, a Fellow of the Chartered Institute of Secretaries in Australia, a Member of the Finance and Treasury Association Limited, and a Member of the Australian Mining and Petroleum Law Association. He has many years experience in the financial, corporate, technical and management areas of the mining industry.
Mr Horan has been chairman and a director of a number of listed mining and exploration companies on the Australian Securities Exchange (ASX), the Alternative Investment Market (AIM) on the London Stock Exchange, the Toronto Stock Exchange (TSX) in Canada and the Port Moresby Stock Exchange (POMSoX) in Papua New Guinea. He is currently the chairman of Marengo Mining Limited (listed on ASX, TSX and POMSoX).
From 1987 until June 1993, Mr Horan was the finance director of Homestake Gold of Australia Limited, now Barrick Gold Corporation, one of Australia’s largest gold producers. He first joined Homestake in 1978 and was responsible for financial, commercial and corporate management functions prior to 1987
272009 Annual Report 27
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when he played a substantial role in the float of the Australian subsidiary. He also fulfilled key responsibilities in subsequent very large debt and equity capital raisings.
From the early 1960s until the second half of the 1970s he held various financial, accounting, corporate administrative and management positions in Poseidon Limited and CRA Limited, following initial technical experience in CRA’s mining operations at Broken Hill.
John J den Dryver BE (Mining), MSc, FAusIMM – Non Executive Director (Chairman of Audit Committee)
John den Dryver is a mining engineer with some 30 years experience in operational and corporate management as well as extensive experience in mining project studies and implementation.
In 1982, Mr den Dryver joined the junior explorer North Flinders Mines Limited as the company’s mining engineer to become part of the small team that discovered the Granites gold mine in the Tanami Desert in the Northern Territory. He was executive director of North Flinders from 1988 to 1997.
In 1997, after Normandy Mining Limited gained control of North Flinders, Mr den Dryver joined Normandy as executive general manager – technical, leading a team of specialist geologists, mining engineers and metallurgists.
In 2003 he set up his own mining consultancy business and is currently a non executive director of Helix Resources Limited.
Keith R Yates BSc (Hons), FAusIMM – Non Executive Director
Keith Yates is a geologist with over 40 years experience in mineral exploration and mine development for a range of metals throughout Australia and in the Pacific and South-East Asia. He has lived in South Australia for over 30 years during which time he has accumulated a substantial knowledge of the geology and mineral potential of the Gawler Craton.
As a founding director of Adelaide Resources Limited, Mr Yates was the executive chairman from its public listing in 1996 until his retirement in 2007.
During his career he has held board and exploration management positions with a number of Australian mining companies and as senior geologist with an international mining group. In the 1980s he held senior positions with the Poseidon Limited group of companies including executive director of Australian Development Limited and director of Kalgoorlie Lake View Pty Ltd. In this period he was closely associated with the discovery of the rich White Devil gold mine at Tennant Creek, Northern Territory.
Mr Yates is chairman of the South Australian Resources Industry Development Board, a member of the South Australian Mining & Petroleum Experts Group, a member of the South Australian National Parks and Wildlife Council, and a past chairman of the Adelaide Branch of the Australasian Institute of Mining and Metallurgy.
Andrew J Brown BA Econ (Hons) – Non Executive Director (appointed 30 April 2009)
Andrew Brown has an honours degree majoring in economics and econometrics from the University of Manchester, England. He has 29 years’ experience in the Australian equity market as a stockbroker, corporate investor, company director and funds manager including working in London and New York. Mr Brown’s particular expertise is in the analysis of financial services companies.
In 1987, Mr Brown joined Natcorp Holdings Limited as investment manager, responsible for provision of detailed analysis pertaining to potential listed company acquisitions and investments.
From late 1988 until April 1994, Mr Brown returned to stockbroking with Baring Securities (Australia) Limited, later joining County NatWest Securities Australia Limited and ANZ McCaughan Securities. During this period, he was a highly rated banking and insurance analyst, as well as, latterly focusing on smaller company research.
In 1994 he joined AMP Investments Australia’s Separately Managed Portfolio (SMP) team, helping to manage over $2 billion of Australian equity investments.
In September 1997, he joined Rothschild Australia Asset Management Limited as head of equities and was responsible for a $5 billion domestic portfolio. He helped engineer significant equity process and cultural change, resulting in a major improvement in investment performance until the middle of 2002.
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Mr Brown is currently the largest shareholder and managing director of Tidewater Investments Limited, an ASX listed investment company specialising in “microcaps” and financial services, and which also manages funds for outside parties.
He is executive director of the Cheviot Kirribilly Vineyard Property Group, chairman of Equities and Freeholds Limited and is a non executive director of Cheviot Bridge Limited and Fat Prophets Australia Fund Limited.
Directorships of other listed companies
Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year, and since year’s end, are as follows:
Name Company Period of Directorship
P J Dowd Phoenix Copper Limited Since 2007 Northgate Minerals Corporation Since 2008 OZ Minerals Limited Since 2009 Buka Gold Limited From 2006 to 2009 Regis Resources Ltd From 2006 to 2009 J P Horan Marengo Mining Limited Since 2003 Golden China Resources Corporation From 2006 to 2007 Michelago Limited From 1995 to 2006 J J den Dryver Helix Resources Limited Since 2004
Intrepid Mines Limited (Formerly NuStar Mining Corporation) From 2003 to 2007
A J Brown Aequs Capital Limited From 2005 to 2008 Cheviot Bridge Limited Since 2003 Cheviot Kirribilly Vineyard Property (Group) Since 2008 Enerji Limited From 2007 to 2008 Equities and Freeholds Limited Since 2007 Fat Prophets Australia Fund Limited Since 2005 Mariner Wealth Management Limited From 2005 to 2006 Retail Star Limited From 2004 to 2006 Signature Brands Limited From 2004 to 2006 Snowball Group Limited From 2003 to 2007 Tidewater Investments Limited Since 2003
Principal Activities The principal continuing activity of the consolidated entity is the exploration for gold, copper, uranium, and other economic mineral deposits.
Financial Results The net result of operations for the year was a profit after income tax of $4,038,576 (2008: loss after income tax benefit of $887,701).
Dividends No dividends were paid or declared since the start of the financial year, and the directors do not recommend the payment of dividends in respect of the financial year.
292009 Annual Report 29
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Review of Operations
a) Overview
During the year the consolidated entity carried out exploration on its tenements with the objective of identifying gold, copper, uranium and other economic mineral deposits. It sold its mineral sand interests in the Eucla Basin and also completed a return of capital to shareholders through the in-specie distribution of securities in Iron Road Limited.
b) Review of Operations
The consolidated entity maintained an active exploration program during the year with operations conducted in South Australia and the Northern Territory.
Direct exploration expenditure was $1.506 million with additional contributions from parties holding or earning an interest in certain joint ventures.
In light of the challenging financial environment, the company reviewed its strategy and determined that it would focus its exploration efforts on the search for gold deposits, with copper and uranium remaining as important but secondary targets.
The company also determined to conduct a measured exploration effort in keeping with its solid cash position but mindful of the likely timeframe for economic recovery.
Exploration for gold and copper continued at the Rover Project near Tennant Creek in the Northern Territory. A program of diamond drilling was in progress at year end with drill holes planned at six targets. The drilling program followed completion of detailed airborne magnetic and ground based gravity geophysical surveys. Shortly after year end, one of the program drillholes at the Rover 4 prospect intersected significant visible copper sulphide mineralisation.
A thorough review of historical exploration data from the Moonta Project located on Yorke Peninsula in South Australia highlighted a number of gold-copper prospects and targets warranting further exploration. Ground based exploration is scheduled for the first half of the 2009/10 financial year.
On Eyre Peninsula, joint venturer Quasar Resources Pty Ltd completed an airborne electromagnetic survey and a drilling program targeting uranium in the Narlaby Palaeochannel, an ancient river system. The drilling showed that an unbound radiogenic zone, first identified in drill holes completed in the joint venture’s 2007 drilling program, extends for at least 600 metres. The radiogenic anomaly was seen in two adjacent 2008 holes which intersected maximum values of 104 and 97 ppm eU3O8 respectively.
At Cleve, on the Eyre Peninsula of South Australia, a drilling program searched for unconformity style uranium mineralisation. The drilling confirmed that the requisite geological ingredients are present on the project and encountered weakly anomalous uranium mineralisation.
Efforts to generate a new gold exploration project resulted in the pegging of an application for an Exploration Permit - Minerals in the Drummond Basin in Queensland. The Drummond Basin hosts significant gold resources of epithermal style, with the Pajingo deposits being well known examples.
During the year the company sold its assets in the Eucla Basin of South Australia to Iluka Resources Limited (Iluka) for $5 million cash, clear of all costs.
The assets sold comprised 49% equity in the Colona Joint Venture (a joint venture with Iluka), including the company’s approximate 30% equity in the Tripitaka mineral sand resource; equity in six mineral claim applications pegged over the Tripitaka deposit; and ownership of the three exploration licences that were subject to the Colona Joint Venture.
The sale decision was made after Iluka advised Adelaide Resources that it would not progress a definitive feasibility study of the Tripitaka project but would develop its larger 100% owned Jacinth – Ambrosia project first.
The company also completed the distribution to its shareholders of securities in Iron Road Limited which had purchased the Warramboo Magnetite Project from Adelaide Resources in February 2008. Iron Road listed on the Australian Securities Exchange in June 2008 with Warramboo being its lead project.
30 Adelaide Resources Limited30
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In consideration for the sale of the project, Adelaide Resources received 21 million fully paid ordinary shares in Iron Road Limited. In September 2008, Adelaide Resources also acquired 10.5 million options to acquire shares in Iron Road Limited.
In December 2008, following shareholder approval and the receipt of favourable rulings from the Australian Taxation Office concerning the proposed transaction, both the Iron Road shares and options were distributed to shareholders. The Iron Road securities were distributed at the ratio of two Iron Road Limited shares and one Iron Road Limited option for every eight Adelaide Resources Limited shares held on 17 November 2008.
Changes in State of Affairs
Other than as mentioned in this Report, the financial statements or notes thereto, there was no significant change in the state of affairs of the consolidated entity during the financial year.
Subsequent Events
Other than as mentioned in this Report, the financial statements or the notes thereto, there have not been any matters or circumstances occurring subsequent to the end of the financial year that have significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.
Environmental Developments
The consolidated entity carries out exploration activities on its properties in South Australia, Queensland and in the Northern Territory. No mining activity has been conducted by the consolidated entity on its properties.
The consolidated entity’s exploration operations are subject to environmental regulations under the various laws of South Australia, Queensland, the Northern Territory, and the Commonwealth. While its exploration activities to date have had a low level of environmental impact, the consolidated entity has adopted a best practice approach in satisfaction of the regulations of relevant government authorities.
Future Developments
Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.
Remuneration Report
This report outlines the remuneration arrangements in place for directors and other key management personnel of the company and its wholly owned subsidiaries.
Where this report refers to the ‘Date of Grant’ of options, the date mentioned is the date on which those options were agreed to be issued (whether conditionally or otherwise).
Director and other Key Management Personnel Details
The following persons acted as directors of the company during or since the end of the financial year:
P J Dowd (Non Executive Chairman) C G Drown (Managing Director) J P Horan (Non Executive Director) J J den Dryver (Non Executive Director) K R Yates (Non Executive Director) A J Brown (Non Executive Director – appointed 30 April 2009) Key management personnel of the Group only comprise the directors named above.
312009 Annual Report 31
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Relationship between the Remuneration Policy and Company Performance
The tables below set out summary information about the consolidated entity's earnings and movements in shareholder wealth for the five years to June 2009:
30 June 2009
30 June 2008
30 June 2007
30 June 2006
30 June 2005
Revenue 315,712 307,538 345,986 225,872 255,886 Net profit / (loss) before tax 4,038,576 (881,666) (3,735,515) (1,506,998) (417,369)Net profit / (loss) after tax 4,038,576 (887,701) (3,788,956) (1,536,998) (449,109)
30 June 2009
30 June 2008
30 June 2007
30 June 2006
30 June 2005
Share price at beginning of the year $0.16 $0.54 $0.38 $0.31 $0.22 Share price at end of year $0.09 $0.16 $0.54 $0.38 $0.31 Basic earnings per share $0.0486 $(0.0110) $(0.0514) $(0.0229) $(0.0073) Diluted earnings per share $0.0462 $(0.0110) $(0.0514) $(0.0229) $(0.0073)
No dividends have been declared during the five years ended 30 June 2009 and the directors do not recommend the payment of a dividend in respect of the year ended 30 June 2009.
There is no link between the company’s performance and the setting of remuneration except as discussed below in relation to options for directors.
Remuneration Philosophy
The performance of the Group depends on the quality of its directors and other key management personnel and therefore the Group must attract, motivate and retain appropriately qualified industry personnel. The Group embodies the following principles in its remuneration framework:
provide competitive rewards to attract and retain high calibre directors and other key management personnel;
link executive rewards to shareholder value (by the granting of share options);
link reward with the strategic goals and performance of the company; and
ensure total remuneration is competitive by market standards.
There is currently no policy or monitoring of key management personnel’s limiting their risk in relation to issued options.
Remuneration Policy
Due to its size, the company does not have a remuneration committee. The compensation of directors is reviewed by the Board with the exclusion of the director concerned. The compensation of other key management personnel is reviewed by the Board.
The Board assesses the appropriateness of the nature and amount of remuneration of such persons on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum shareholder benefit from retention of high quality directors and other key management personnel. External advice on remuneration matters is sought whenever the Board deems it necessary.
The remuneration of the directors and other key management personnel is not dependent on the satisfaction of a performance condition. Share options have been issued to key management personnel in prior years. These options do not have any performance conditions. The directors have decided that the exclusion of performance conditions is appropriate, after consideration of industry practice.
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Non Executive Director Remuneration The Board seeks to set remuneration of non executive directors at a level which provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is appropriate at this stage of the company’s development. Currently, as Non Executive Chairman, P J Dowd is entitled to receive $50,000 per annum exclusive of the statutory superannuation. J J den Dryver, K R Yates and A J Brown are each entitled to receive $31,250 per annum exclusive of the statutory superannuation. J P Horan is entitled to receive $31,250 per annum exclusive of the statutory superannuation, plus the amounts set out below in the company’s consultancy agreement with an entity associated with him. Previously, prior to the appointment of A J Brown to the Board on 30 April 2009, P J Dowd was entitled to receive $70,000 per annum exclusive of statutory superannuation and J J den Dryver and K R Yates were each entitled to receive $35,000 per annum exclusive of statutory superannuation and J P Horan was entitled to receive $35,000 per annum exclusive of statutory superannuation, plus the amounts set out below in the company’s consultancy agreement with an entity associated with him. In addition, non executive directors are entitled to be paid reasonable travelling, accommodation and other expenses incurred as a consequence of their attendance at meetings of directors and otherwise in the execution of their duties as directors. Managing Director Remuneration The company aims to reward the managing director with a level and mix of remuneration commensurate with his position and responsibilities within the company to:
align the interests of the managing director with those of shareholders;
link reward with the strategic goals and performance of the company; and
ensure total remuneration is competitive by market standards.
Currently the company has a services agreement with an entity associated with C G Drown, details of which are set out below. Summary of amounts paid to Key Management Personnel The table below discloses the compensation of the key management personnel of the Group during the year.
2009 Short-term employee benefits Salary & Fees (i)
Post employment
superannuation Sub total
Share-based payments options (ii) Total
Percentage of total
remuneration for the year
that consists of options
$ $ $ $ $ %
P J Dowd 66,665 - 66,665 - 66,665 - C G Drown 223,963 - 223,963 - 223,963 - J P Horan 144,538 3,094 147,632 - 147,632 - J J den Dryver 36,978 3,094 40,072 - 40,072 - K R Yates 34,378 3,094 37,472 - 37,472 - A J Brown 5,208 - 5,208 - 5,208 - 2009 Total 511,730 9,282 521,012 - 521,012 -
(i) Includes consulting fees paid to directors. (ii) Share options do not represent cash payments to key management personnel and share options
granted may or may not ultimately be exercised by the key management personnel.
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2008 Short-term employee benefits Salary & Fees (i)
Post employment
superannuation Sub total
Share-based payments options (ii) Total
Percentage of total
remuneration for the year
that consists of options
$ $ $ $ $ % P J Dowd 58,334 - 58,334 - 58,334 - C G Drown 218,644 - 218,644 - 218,644 - J P Horan 151,246 2,850 154,096 - 154,096 - J J den Dryver 47,798 6,300 54,098 - 54,098 - K R Yates 88,378 2,165 90,543 - 90,543 - 2008 Total 564,400 11,315 575,715 - 575,715 -
(i) Includes consulting fees paid to directors.
(ii) Share options do not represent cash payments to key management personnel and share options granted may or may not ultimately be exercised by the key management personnel.
No key management personnel appointed during the year received a payment as part of his consideration for agreeing to hold the position.
Service Agreements
The consolidated entity entered into service agreements with an entity associated with C G Drown for a term of three years from 5 November, 2007 and a consultancy agreement with an entity associated with J P Horan for a term of two years from 1 October 2007, extended for a further 12 months. For the year ended 30 June 2008 the consolidated entity had service agreements with entities associated with C G Drown and J P Horan.
Should any of the above agreements be terminated by the company earlier than their expiry date, a contingency exists for the contracted amount payable to the end of their terms. The entities associated with C G Drown and J P Horan may terminate their agreements with three months notice. As at 30 June 2009, the consolidated entity had a contingent liability in relation to these agreements of $291,124 (2008: $538,846).
Details of the current services and consultancy agreements are set out below:
2009 Director Terms C G Drown Daily rate of $950 for a minimum of 218 days per annum J P Horan Daily rate of $960 for a minimum of 90 days per annum
2008 Director Terms C G Drown Daily rate of $950 for a minimum of 218 days per annum J P Horan Daily rate of $960 for a minimum of 90 days per annum
The consolidated entity also entered into a consultancy agreement with J J den Dryver on 28 May 2008 to provide consulting services on an as needs basis at the rate of $1,300 per day (previously the rate was $1,000 per day).
Share Options held by Directors
During the financial year, the following share options were on issue:
Options series Grant date Expiry date Grant date fair value Vesting date
DO November 2005 15 November 2005 14 November 2010 $0.3048 15 November 2005 DO November 2006 21 November 2006 14 November 2010 $0.2621 21 December 2006 ESOP December 2003 23 December 2003 22 December 2008 * 23 January 2004 “DO” means director share options and “ESOP” means share options issued under the employee share option plan. Shares issued under ESOP were issued to the person prior to the person being appointed a director.
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* Not applicable as options were issued and vested before 1 January 2005.
During the year ended 30 June 2009 no share options were granted to key management personnel.
The following table summarises the value of options granted, exercised or lapsed during the year that relate to key management personnel:
Options granted value at grant
date $
Options exercised value at exercise date
$
Options lapsed value at time of
lapse $
P J Dowd - - - C G Drown - - - J P Horan - - - J J den Dryver - - - K R Yates - - - A J Brown - - -
Value of options – basis of calculation
• Value of options granted at grant date is calculated by multiplying the fair value of options at grant date by the number of options granted during the financial year.
• Value of options exercised at exercise date is calculated by multiplying the fair value of options at the time they are exercised (calculated as the difference between exercise price and the Australian Securities Exchange last sale price on the day that the options were exercised) by the number of options exercised during the financial year.
• Value of options lapsed at the lapsed date is calculated by multiplying the fair value of options at the time they lapsed multiplied by the number of options lapsed during the financial year.
The total value of options included in compensation for the financial year is calculated in accordance with Accounting Standard AASB 2 “Share-based Payment”. Options granted during the financial year are recognised in compensation over their vesting period.
Directors’ Shareholdings
The following table sets out each director’s relevant interest in shares in the company as at the date of this report.
Directors
Fully paid ordinary shares
Number
Options to acquire ordinary shares
Number P J Dowd - 500,000 CG Drown 839,130 400,000 J P Horan 1,793,130 1,000,000 J J den Dryver - 400,000 K R Yates 5,743,408 1,000,000 A J Brown 12,261,208 - 20,636,876 3,300,000
The above table includes shares held by related parties of directors.
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Meetings of Directors
The number of meetings of the company’s Board of Directors attended by each director during the year ended 30 June 2009 was:
2009 Meetings held while in office Meetings attended
P J Dowd 9 9 C G Drown 9 9 J P Horan 9 9 J J den Dryver 9 9 K R Yates 9 9 A J Brown 1 1
The company held two meetings of the Audit Committee during the year ended 30 June 2009. The members of this committee comprise J J den Dryver (Chairman) and P J Dowd.
Non-Audit Services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 21 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not compromise the external auditor’s independence for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact on the integrity and objectivity of the auditor, and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.
Auditors Independence Declaration
The auditor’s independence declaration is included on page 36 of the annual report.
Indemnification of Officers and Auditors
During the year the company arranged insurance cover and paid a premium for directors in respect of indemnity against third party liability. At the Annual General Meeting of the company held on 17 November 1997 shareholders resolved to extend the indemnification for a period of seven years after a director ceases to hold office. In accordance with the terms and conditions of the insurance policy, the amount of the premium paid has not been disclosed on the basis of confidentiality, as is permitted under Section 300 (9) of the Corporations Act 2001.
The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred by an officer or auditor.
Signed at Adelaide this 16th day of September 2009 in accordance with a resolution of the directors.
C G Drown J P Horan Director Director
Page 10
Meetings of Directors
The number of meetings of the company’s Board of Directors attended by each director during the year ended 30 June 2009 was:
2009 Meetings held while in office Meetings attended
P J Dowd 9 9 C G Drown 9 9 J P Horan 9 9 J J den Dryver 9 9 K R Yates 9 9 A J Brown 1 1
The company held two meetings of the Audit Committee during the year ended 30 June 2009. The members of this committee comprise J J den Dryver (Chairman) and P J Dowd.
Non-Audit Services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 21 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not compromise the external auditor’s independence for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact on the integrity and objectivity of the auditor, and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.
Auditors Independence Declaration
The auditor’s independence declaration is included on page 36 of the annual report.
Indemnification of Officers and Auditors
During the year the company arranged insurance cover and paid a premium for directors in respect of indemnity against third party liability. At the Annual General Meeting of the company held on 17 November 1997 shareholders resolved to extend the indemnification for a period of seven years after a director ceases to hold office. In accordance with the terms and conditions of the insurance policy, the amount of the premium paid has not been disclosed on the basis of confidentiality, as is permitted under Section 300 (9) of the Corporations Act 2001.
The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred by an officer or auditor.
Signed at Adelaide this 16th day of September 2009 in accordance with a resolution of the directors.
C G Drown J P Horan Director Director
36 Adelaide Resources Limited36
Liability limited by a scheme approved under Professional Standards Legislation.
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Income statement for the financial year ended 30 June 2009 Note Consolidated Company
2009 $
2008 $
2009 $
2008 $
Revenue 4(a) 315,712 307,538 300,893 307,038 Other income 4(b) 4,784,297 1,039,059 - Exploration expense written off 4(b) (119,489) (176,665) - - Doubtful debts allowance 4(b) - - (1,616,919) Reversal of doubtful debt allowance 4(b) - 5,881,060 - Administration expenses (414,396) (335,368) (414,396) (335,368) Corporate consulting expenses (169,787) (187,447) (169,787) (187,447) Company promotion (60,288) (66,654) (60,288) (66,654) Salaries and wages (42,675) (106,118) (42,675) (106,118) Directors fees (175,007) (146,328) (175,007) (146,328) Occupancy expenses (67,979) (72,947) (67,979) (72,947) Share based remuneration (11,812) (97,677) (11,812) (97,677) Profit / (Loss) before income tax 4,038,576 (881,666) 6,279,068 (2,322,420) Tax (expense) / income 5 - (6,035) 1,092,171 426,041 Net Profit / (Loss) 4,038,576 (887,701) 7,371,239 (1,896,379)
Earnings Per Share Basic (cents per share) – Profit / (Loss) 27 4.86 (1.10) Diluted (cents per share) – Profit / (Loss) 27 4.62 (1.10) The above income statement should be read in conjunction with the accompanying notes.
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Balance sheet as at 30 June 2009 Note Consolidated Company
2009 $
2008 $
2009 $
2008 $
CURRENT ASSETS Cash and cash equivalents 6,179,379 3,657,746 2,084,652 3,647,246 Trade and other receivables 6 323,533 160,280 309,054 160,280 Other financial assets 7 201,550 252,980 201,550 252,980
TOTAL CURRENT ASSETS 6,704,462 4,071,006 2,595,256 4,060,506 NON-CURRENT ASSETS
Exploration and evaluation expenditure 8 4,920,622 4,788,874 - - Shares and share options in Iron Road Limited 29 40,072 7,665,000 40,072 7,665,000
Shares in controlled entity - - 10,001 10,001 Plant and equipment 9 69,475 72,650 69,475 72,650 Other receivables 10 - - 7,506,739 - Deferred tax assets 5(b) - - 1,468,997 1,430,488
TOTAL NON-CURRENT ASSETS 5,030,169 12,526,524 9,095,284 9,178,139 TOTAL ASSETS 11,734,631 16,597,530 11,690,540 13,238,645 CURRENT LIABILITIES
Trade and other payables 11 391,801 701,437 391,801 701,437 Provisions 12 3,343 11,604 3,343 11,604
TOTAL CURRENT LIABILITIES 395,144 713,041 395,144 713,041 NON-CURRENT LIABILITIES
Provisions 13 34,438 34,775 34,438 34,775 Other liabilities 14 38,448 20,579 - -
TOTAL NON-CURRENT LIABILITIES 72,886 55,354 34,438 34,775 TOTAL LIABILITIES 468,030 768,395 429,582 747,816 NET ASSETS 11,266,601 15,829,135 11,260,958 12,490,829
EQUITY
Issued capital 16 17,933,796 18,349,580 17,933,796 18,349,580 Reserves 17 1,053,415 8,407,177 1,053,415 8,407,177 Accumulated losses 18 (7,720,610) (10,927,622) (7,726,253) (14,265,928)
TOTAL EQUITY 11,266,601 15,829,135 11,260,958 12,490,829 The above balance sheet should be read in conjunction with the accompanying notes.
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Statement of recognised income and expense for the year ended 30 June 2009 Consolidated Company 2009 2008 2009 2008 $ $ $ $ Available–for–sale investments:
Profit / (Loss) on available-for-sale investments taken to equity (6,637,959) 7,318,447 (6,637,959) 7,318,447
Transfer to profit and loss on distribution of available-for-sale investments (727,615) - (727,615) -
Net income recognised directly in equity (7,365,574) 7,318,447 (7,365,574) 7,318,447
Profit / (Loss) for the period 4,038,576 (887,701) 7,371,239 (1,896,379) Total recognised income and expense for the period (3,326,998) 6,430,746 5,665
5,422,068
The above statement of recognised income and expense should be read in conjunction with the accompanying notes.
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Cash flow statement for the year ended 30 June 2009
Inflows/(Outflows)
Consolidated Company
2009 $
2008 $
2009 $
2008 $
Cash flows relating to operating activities Payments to suppliers and employees (775,384) (1,249,332) (121,615) (1,249,332) Other receipts - 4,967 - 4,967
Net operating cash flows (Note 30(a)) (775,384) (1,244,365) (121,615) (1,244,365)
Cash flows relating to investing activities Interest received 316,332 297,245 315,993 296,745 Payments for exploration and evaluation expenditure
(1,905,890)
(1,524,607) - -
Purchase of share options (105,000) - (105,000) - Proceeds from sale of tenement 5,000,000 - - - State government grant received 17,868 20,579 - - Payments for plant and equipment (27,460) (55,017) (27,460) (55,017) Proceeds from sale of plant and equipment 1,167 - 1,167 - Funding of controlled entity - - (1,625,679) (1,504,028)
Net investing cash flows 3,297,017 (1,261,800) (1,440,979) (1,262,300) Cash flows relating to financing activities
Proceeds from share issues - 1,758,940 - 1,758,940 Payments for capital raising costs - (20,117) - (20,117)
Net financing cash flows - 1,738,823 - 1,738,823 Net (decrease) / increase in cash 2,521,633 (767,342) (1,562,594) (767,842) Cash at beginning of financial year 3,657,746 4,425,088 3,647,246 4,415,088 Cash at end of financial year 6,179,379 3,657,746 2,084,652 3,647,246 The above cash flow statement should be read in conjunction with the accompanying notes.
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Notes to the Financial Statements for the Financial Year Ended 30 June 2009 1. General information
Adelaide Resources Limited (the company) is a listed public company, incorporated in Australia and operating in Australia. Adelaide Resources Limited’s registered office and its principal place of business are as follows:
Registered office Principal place of business 69 King William Road 69 King William Road Unley Unley South Australia 5061 South Australia 5061
2. Adoption of new and revised Accounting Standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Various other Standards and Interpretations were on issue but were not yet effective at the date of authorisation of the financial report. The issue of these Standards and Interpretations do not affect the Group’s present policies and operations. The directors anticipate that the adoption of these Standards and Interpretations in future periods will not materially effect the amounts recognised in the financial statements of the Company or the Group but may change the disclosure presently made in the financial statements of the Company or the Group.
3. Significant accounting policies
Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report includes the separate financial statements of the company and the consolidated financial statements of the Group. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards (‘IFRS’). The financial statements were authorised for issue by the directors on 16th September 2009. Basis of preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. In the application of the Group’s accounting policies, which are described below, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
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a) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash in banks and bank deposits.
b) Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of employee benefits, expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date. Contributions to accumulated benefit superannuation plans are expensed when incurred.
c) Exploration and Evaluation Expenditure Exploration and evaluation expenditures in relation to each separate area of interest, are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: i) the rights to tenure of the area of interest are current; and ii) at least one of the following conditions is also met:
• the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale: or
• exploration and evaluation activities in the area of interest have not at the
reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploration drilling, trenching and sampling and associated activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are relate directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in AASB 6 “Exploration for and Evaluation of Mineral Resources”) suggest that the carrying amount of exploration and evaluation assets may exceed its recoverable amount. The recoverable amount of the exploration and evaluation assets (or the cash-generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment, reclassified to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.
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d) Financial assets Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit and loss which are initially measured at fair value. Other financial assets are classified into the following specified categories; financial assets ‘at fair value through profit or loss’, ‘held to maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.
Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit and loss’. Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:
has been acquired principally for the purpose of selling in the near future; is a part of an identified portfolio of financial instruments that the group manages
together and has a recent actual pattern of short-term profit-taking; or is a derivative that is not designated and effective as a hedging instrument.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.
Held-to-maturity investments Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates where the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. Available-for-sale financial assets Certain shares and redeemable notes held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined based on quoted market prices. Gains and losses arising from changes in fair value are recognised directly in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly on the profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period.
Dividends on available-for-sale equity instruments are recognised in profit and loss when the Group’s right to receive payment is established.
Loans and Receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and
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receivables are measured at amortised cost using the effective interest method less impairment.
Interest is recognised by applying the effective interest rate. Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit and loss.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date of impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity.
e) Goods and service tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense or:
ii) for receivables and payables which are recognised inclusive of GST, the net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
f) Impairment of assets (other than exploration and evaluation) At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
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If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior periods. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.
g) Income tax Current tax Current tax is calculated by references to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacting by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.
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Tax consolidation The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Adelaide Resources Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 5 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.
h) Joint ventures Interests in jointly controlled assets are reported in the financial statements by including the consolidated entity’s share of assets employed in the joint ventures, the share of liabilities incurred in relation to the joint ventures and the share of any expenses incurred in relation to the joint ventures in their respective classification categories.
i) Financial instruments issued by the company Debt and equity instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Other financial liabilities Other financial liabilities are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
j) Plant and equipment Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period.
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The following estimated useful lives are used in the calculation of deprecation:
• Plant and equipment – at cost 3-5 years
k) Principles of consolidation The consolidated financial statements incorporate the financial statements of the company and entities (including special purpose entities) controlled by the company (its subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial statements of the company, intra-group transactions (‘common control transactions’) are generally accounted for by reference to the existing (consolidated) book value of the items. Where the transaction value of common control transactions differ from their consolidated book value, the difference is recognised as a contribution by or distribution to equity participants by the transacting entities.
l) Revenue
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, stock rotation, price protection, rebates and other similar allowances. Sale of goods Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the entity; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Dividend and interest revenue Dividend revenue from investments is recognised when the shareholder’s right to receive payment has been established.
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is that rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
m) Share-based payments Equity-settled share-based payments granted after 7 November 2002 that vest on or after 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted,
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based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest.
n) Government grants Government grants are assistance by government in the form of transfers of resources to the consolidated entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.
Government grants are not recognised until there is reasonable assurance that the consolidated entity will comply with the conditions attached to them and the grant will be received. Government grants whose primary condition is to assist with exploration activities are recognised as deferred income in the balance sheet and recognised as income on a systematic basis when the related exploration and evaluation is written off.
Other government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate on a systematic basis. Government grants receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the consolidated entity with no future related costs are recognised as income in the period in which it becomes receivable.
o) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method.
The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ (2004) are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.
Goodwill arising from acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
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Consolidated Company 2009
$ 2008
$ 2009
$ 2008
$ 4. PROFIT / (LOSS) FROM OPERATIONS
a) Revenue from continuing operations consisted of the following items
Interest income: Bank deposits 298,071 279,394 283,252 278,894 Income securities 17,641 23,177 17,641 23,177 315,712 302,571 300,893 302,071 Other - 4,967 - 4,967
315,712 307,538 300,893 307,038
b) Profit / (Loss) for the year includes the following gains and losses
Other income Profit on sale of tenements (i) 3,745,238 - - -
Profit on sale of property, plant and equipment 863 - 863 -
Gain as a result of in-specie distribution of shares in Iron Road Limited (Note 17)
727,615
-
727,615
-
Change in fair value of financial assets designated as at fair value through the profit and loss
101,582
-
101,582
-
Research and development refund 203,980 - 203,980 - Other 5,019 - 5,019 -
4,784,297 - 1,039,059 -
Other expenses Depreciation of plant and equipment 30,332 22,370 30,332 22,370 Exploration write-offs 119,489 176,665 - - Operating lease rental expenses 67,979 72,947 67,979 72,947
Allowance for doubtful debts: Subsidiary
-
-
-
1,616,919
Reversal of allowance for doubtful debts: Subsidiary
-
-
(5,881,060)
- Employee benefit expense: Post employment benefits:
Accumulated benefit superannuation plans
27,264
30,034
27,264
30,034
Share based payments:
Equity settled share-based payments (ii)
5,062
39,866
5,062
39,866
Other employee benefits 692,537 747,818 692,537 747,818
724,863 817,718 724,863 817,718
Less amounts capitalised in exploration and evaluation expenditure
(332,332)
(337,959)
(332,332)
(337,959) 392,531 479,759 392,531 479,759
(i) During the year ended 30 June 2009 the company sold a number of tenements in the
Eucla Basin to Iluka Resources Limited for $5,000,000. The sale resulted in a profit to the consolidated entity of $3,745,238.
(ii) Share based payments relate to share options granted during the year to employees.
Share options do not represent cash payments to employees and share options granted may or may not be exercised by the employees.
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Consolidated Company 2009 2008 2009 2008 $ $ $ $
5. INCOME TAX (a) Income tax recognised in profit or loss Current tax expense 851,520 - (202,142) -
Deferred tax expense/(income) relating to the origination and reversal of temporary differences and tax losses
(851,520)
6,035
(890,028)
(426,041)
Total tax expense/(income) - 6,035 (1,092,170) (426,041)
The prima facie income tax expense on the loss before income tax reconciles to the tax expense/ (income) in the financial statements as follows:
Profit / (Loss) from continuing operations
4,038,576
(881,666)
6,279,068
(2,322,420)
Income tax income calculated at 30%
1,211,573
(264,500)
1,883,720
(696,726)
Allowance for subsidiary receivable - - (1,764,318) 485,076 Share based payments 3,544 29,303 3,544 29,303 Other 18,372 541 18,373 691
Gain as a result of in-specie distribution of Iron Road Limited shares (218,285) - (218,285) -
Change in fair value of financial assets through profit and loss (30,475) - (30,475) -
Prior year tax losses recognised (984,729) (444,604) (984,729) (444,604) Current year tax losses not recognised - 685,295 - 200,219 Tax expense (income) - 6,035 (1,092,170) (426,041)
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.
(b) Recognised tax assets and liabilities Deferred tax assets and liabilities are attributable to the following:
Consolidated Company 2009 2008 2009 2008 $ $ $ $ Trade and other receivables (71,827) 6,475 (67,483) 6,475 Exploration and evaluation expenditure (1,476,187) (1,436,663) - - Eyre Energy IPO costs 37,994 57,208 37,994 57,208 Capital raising costs 30,997 55,240 30,997 55,240 Trade and other payables 29,344 4,050 29,344 4,050 Employee benefits 11,334 13,914 11,334 13,914 Other liabilities 11,534 6,174 - - (1,426,811) (1,293,602) 42,186 136,887 Tax value of losses carried forward 1,426,811 1,293,602 1,426,811 1,293,602 Net deferred tax assets / (liabilities) - - 1,468,997 1,430,489
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(c) Unrecognised deferred tax assets A deferred tax asset has not been recognised in respect of the following item:
Consolidated Company 2009 2008 2009 2008 $ $ $ $ Tax Losses-revenue 984,729 2,511,660 384,390 1,369,119
A deferred tax asset has not been recognised in respect of the above tax losses because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefit.
(d) Movement in recognised temporary differences and tax losses
Consolidated Company 2009 2008 2009 2008 $ $ $ $
Opening balance - - 1,430,489 998,412 Recognised in equity - 6,035 - 6,035 Recognised in income - (6,035) 1,092,170 426,041 Tax losses transferred to offset tax payable - - (1,053,662) - Closing balance - - 1,468,997 1,430,489
(e) Movement in provision for tax Opening balance - - - - Transfer of liability from subsidiary - - (1,053,662) - Utilisation of recognised tax losses - - 1,053,662 - Closing balance - - - -
Tax consolidation Relevance of tax consolidation to the consolidated entity The company and its wholly-owned Australian resident entities are in a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax consolidated group is Adelaide Resources Limited. Nature of tax funding arrangement Entities within the tax-consolidated group have entered into a tax funding arrangement with the head entity. Under the terms of the tax funding arrangement, Adelaide Resources Limited and its wholly owned Australian resident entities have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the-consolidated group.
Consolidated Company 2009
$ 2008
$ 2009
$ 2008
$ 6. CURRENT TRADE AND OTHER
RECEIVABLES
Trade receivables - - - - Interest receivable 20,965 21,584 6,484 21,584 Other receivables 302,568 138,696 302,569 138,696 323,533 160,280 309,053 160,280
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Consolidated Company
2009 $
2008 $
2009 $
2008 $
7. OTHER CURRENT FINANCIAL ASSETS Available for sale at fair value Income securities 201,550 252,980 201,550 252,980
8. EXPLORATION AND
EVALUATION EXPENDITURE
Costs brought forward 4,788,874 3,328,041 - - Expenditure incurred during the year 1,505,999 1,952,498 - - 6,294,873 5,280,539 - - Leases sold (1,254,762) (315,000) - - Expenditure written off (119,489) (176,665) - - 4,920,622 4,788,874 - - Expenditure written off relates to exploration and evaluation expenditure associated with tenements
or parts of tenements that have been surrendered $119,489 (2008: $176,665). The recoverability of the carrying value of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.
Consolidated Company
9. PLANT AND EQUIPMENT $ $ Gross carrying amount Balance at 1 July 2007 162,816 162,816 Additions 55,017 55,017 Disposals (11,116) (11,116) Balance at 30 June 2008 206,717 206,717 Additions 27,460 27,460 Disposals (23,537) (23,537) Balance at 30 June 2009 210,640 210,640 Accumulated Depreciation Balance at 1 July 2007 (122,812) (122,812) Disposals 11,116 11,116 Depreciation expense (22,370) (22,370) Balance at 30 June 2008 (134,066) (134,066) Disposals 23,233 23,233 Depreciation Expense (30,332) (30,332) Balance at 30 June 2009 (141,165) (141,165) Net book value Balance at 30 June 2008 72,651 72,651 Balance at 30 June 2009 69,475 69,475
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Consolidated Company
2009 $
2008 $
2009 $
2008 $
10. NON-CURRENT RECEIVABLES Amount due from subsidiaries - - 9,511,786 7,886,106 Allowance for doubtful debt - - (2,005,047) (7,886,106) - - 7,506,739 -
11. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables and accruals 391,801 701,437 391,801 701,437
12. CURRENT LIABILITIES – PROVISIONS Employee benefits 3,343 11,604 3,343 11,604
13. NON-CURRENT LIABILITIES – PROVISIONS
Employee benefits 34,438 34,775 34,438 34,775
14. NON-CURRENT LIABILITIES – OTHER Deferred income (government grant) 38,448 20,579 - -
15. EMPLOYEE BENEFITS
The aggregate employee benefits liability recognised in and included in the financial statements is as follows
Provision for employee benefits Current (Note 12) 3,343 11,604 3,343 11,604 Non-current (Note 13) 34,438 34,775 34,438 34,775 37,781 46,379 37,781 46,379
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16. ISSUED CAPITAL
Consolidated Company
2009 $
2008 $
2009 $
2008 $
Issued share capital:
83,156,035 fully paid ordinary shares (2008: 83,156,035) 17,933,796 18,349,580 17,933,796 18,349,580
Movement in issued shares for the year: 2009 2008 No. $ No. $ Balance at beginning of financial year 83,156,035 18,349,580 77,060,960 16,604,722 Capital reduction as a result of in-specie
distribution of Iron Road Limited shares (Note 29)
-
(311,835)
-
- Capital reduction as a result of in-specie
distribution of Iron Road Limited share options (Note 29)
-
(103,949)
-
- Issued at 31 cents - - 5,100,075 1,580,940 Conversion of options at 17 cents - - 700,000 119,000 Conversion of options at 20 cents - - 295,000 59,000 Costs associated with the issue of shares - - - (20,117) Related income tax - - - 6,035 Balance at end of financial year 83,156,035 17,933,796 83,156,035 18,349,580
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value. Fully paid shares carry one vote per share and carry the right to dividends.
17. RESERVES
Consolidated Company 2009
$ 2008
$ 2009
$ 2008
$ Employee equity-settled benefits 1,094,009 1,082,197 1,094,009 1,082,197 Available-for-sale revaluation (40,594) 7,324,980 (40,594) 7,324,980 1,053,415 8,407,177 1,053,415 8,407,177
(a) Employee equity-settled benefits reserve Balance at beginning of the financial year 1,082,197 984,520 1,082,197 984,520 Share based payment 11,812 97,677 11,812 97,677 Balance at end of the financial year 1,094,009 1,082,197 1,094,009 1,082,197
The employee equity-settled benefits reserve arises on the grant of share options to employees, consultants and executives under the Employee Share Option Plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised. Further information about share based payments made under the Plan are shown in note 19 to the financial statements.
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Consolidated Company 2009
$ 2008
$ 2009
$ 2008
$ (b) Available-for-sale revaluation reserve Balance at beginning of the financial year 7,324,980 6,533 7,324,980 6,533
Valuation (loss) / gain – shares in Iron Road Limited (6,586,529) 7,350,000 (6,586,529) 7,350,000
Cumulative gain transferred to income statement on in-specie distribution of Iron Road Limited shares
(727,615) - (727,615) -
Valuation (loss) – other financial assets (51,430) (31,553) (51,430) (31,553) Balance at end of the financial year (40,594) 7,324,980 (40,594) 7,324,980
The available-for-sale revaluation reserve arises on the revaluation of the available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset, and is effectively realised, is recognised in profit or loss. Where a revalued financial asset is impaired that portion of the reserve which relates to that financial asset is recognised in profit or loss.
18. ACCUMULATED LOSSES
Consolidated Company 2009
$ 2008
$ 2009
$ 2008
$ Balance at beginning of financial year (10,927,622) (10,039,921) (14,265,928) (12,369,549)
In-specie distribution of shares and share options in Iron Road Limited (Note 30) (831,564) - (831,564) -
Net Profit / (Loss) 4,038,576 (887,701) 7,371,239 (1,896,379) Balance at end of financial year (7,720,610) (10,927,622) (7,726,253) (14,265,928)
19. SHARE OPTION PLAN
The consolidated entity has an ownership-based compensation plan for executives, employees and consultants. In accordance with the provisions of the Employee Share Option Plan, as approved by shareholders at an annual general meeting, directors may issue options to purchase shares in the company to executives, employees, and consultants, at an issue price determined by the market price of ordinary shares at the time the option is granted. No directors participate in the Employee Share Option Plan. In accordance with the terms of the Employee Share Option Plan, options vest at grant date and may be exercised at any time from the date of their issue to the date of their expiry.
Share options are not listed, carry no rights to dividends and no voting rights.
The following share based payment arrangements were in existence during the financial year.
Options – Series Number Grant Date Expiry
Date Exercise
Price Fair value at grant date
Employee Share Option Plan
December 2003 225,000 23/12/2003 22/12/2008 $0.20 * December 2007 200,000 20/12/2007 19/12/2012 $0.35 0.1993 March 2008 500,000 31/03/2008 30/03/2013 $0.30 0.1156 December 2008 350,000 17/12/2008 16/12/2013 $0.04 0.0337 Director Options November 2005 2,800,000 15/11/2005 14/11/2010 $0.55 0.3048 November 2006 500,000 21/11/2006 14/11/2010 $0.55 0.2621
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* Not applicable as options were issued and vested before 1 January 2005. No amount was recorded when these were issued. Any consideration received on the exercise of these options shall be recognised in issued capital.
The weighted average of fair value of options granted during the year is $0.0337 (2008: $0.1395) per option. Options were valued using the Black-Scholes model using the following inputs:
Grant date share price 4.0 cents Exercise price 4.0 cents Calculated volatility 121.6% Option expiry 16 December 2013 Risk free interest rate 4.25%
The following reconciles the outstanding share options granted under the Plan at the beginning and end of the financial year:
Share Option Plan 2009 2008
Number of options
Weighted average
exercise price $
Number of options
Weighted average
exercise price $
Balance at beginning of financial year 4,225,000 0.492 4,520,000 0.451 Granted during the financial year 350,000 0.040 700,000 0.314 Exercised during the financial year - - ( 995,000) 0.179 Lapsed during the financial year (225,000) (0.200) - - Cancelled during the financial year (50,000) (0.350) - - Balance at end of the financial year (i) 4,300,000 0.472 4,225,000 0.492
(i) Options outstanding at end of the financial year The share options outstanding at the end of the financial year had an average exercise price of
$0.472 (2008: $0.492) and a weighted average remaining contractual life of 721days (2008: 969 days).
20. KEY MANAGEMENT PERSONNEL COMPENSATION
The key management personnel of Adelaide Resources Limited during the year were:
• P J Dowd (Non Executive chairman) • C G Drown (Managing director) • J P Horan (Non Executive director and company secretary) • J J den Dryver (Non Executive director) • K R Yates (Non Executive director) • A J Brown (Non Executive director – appointed 30 April 2009)
The aggregate compensation of key management personnel of the consolidated entity and the company is set out below:
Consolidated Company
2009 $
2008 $
2009 $
2008 $
Short-term employee benefits 511,730 564,400 511,730 564,400 Post employment benefits 9,282 11,315 9,282 11,315 Share-based payments (i) - - - -
521,012 575,715 521,012 575,715
(i) Share based payments relate to share options granted during the year to key management personnel. Share options do not represent cash payments to key management personnel and share options granted may or may not be exercised by the key management personnel.
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Consolidated Company 2009
$ 2008
$ 2009
$ 2008
$ 21. REMUNERATION OF AUDITORS Audit or Review of the financial report 27,203 24,750 27,203 24,750 Accounting advice 15,862 8,500 15,862 8,500 Tax return preparation and advice 36,501 25,500 36,501 25,500 79,566 58,750 79,566 58,750
The auditor of Adelaide Resources Limited is Deloitte Touche Tohmatsu.
22. RELATED PARTY DISCLOSURES
a) Equity interests in related parties
Equity interests in subsidiaries Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 28 to the financial statements. Interests in joint ventures Details of interests in joint ventures are disclosed in Note 23 to the financial statements.
b) Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 20 and the Remuneration Report of the Directors’ Report.
c) Transactions with key management personnel
Other than as disclosed in the Remuneration Report of the Directors’ Report, there were no transactions with key management personnel or their personally related entities during the year ended 30 June 2009 (2008: NIL).
d) Transactions within wholly owned group
The ultimate parent entity in the wholly-owned group is Adelaide Resources Limited. Amounts receivable from the controlled entities are disclosed in Note 10 to the financial statements. During the financial year Adelaide Resources Limited provided accounting and administrative services at no cost to the controlled entities and made interest free advances. Tax losses have been transferred to Adelaide Resources Limited for no consideration.
e) Equity holdings of key management personnel
(i) Fully paid ordinary shares issued by Adelaide Resources Limited
2009 Balance 1/7/08 Net Changes Balance 30/6/09 Balance held Nominally
P J Dowd - - - - C G Drown 839,130 - 839,130 - J P Horan 1,793,130 - 1,793,130 - J J den Dryver - - - - K R Yates 5,743,408 - 5,743,408 - A J Brown - 12,261,208* 12,261,208 -
* On market purchases prior to A J Brown becoming a director.
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2008 Balance 1/7/07 Net Changes Balance 30/6/08 Balance held
Nominally P J Dowd - - - - C G Drown 373,000 466,130** 839,130 - J P Horan 1,777,000 16,130** 1,793,130 - J J den Dryver - - - - K R Yates 5,727,278 16,130** 5,743,408 -
** The net change includes the issue of 16,130 shares by the company as a result of
participating in the Share Purchase Plan, which was available to all shareholders.
(ii) Options to acquire fully paid ordinary shares issued by Adelaide Resources Limited
2009 Balance 1/7/08 Granted Lapsed Balance
30/6/09 Balance
held Nominally
Vested and exercisable
P J Dowd 500,000 - - 500,000 - 500,000 C G Drown 525,000 - 125,000 400,000 - 400,000 J P Horan 1,000,000 - - 1,000,000 - 1,000,000 J J den Dryver 500,000 - 100,000 400,000 - 400,000 K R Yates 1,000,000 - - 1,000,000 - 1,000,000
2008 Balance 1/7/07 Granted Exercised Balance
30/6/08 Balance
held Nominally
Vested and exercisable
P J Dowd 500,000 - - 500,000 - 500,000 C G Drown 975,000 - 450,000 525,000 - 525,000 J P Horan 1,000,000 - - 1,000,000 - 1,000,000 J J den Dryver 500,000 - - 500,000 - 500,000 K R Yates 1,000,000 - - 1,000,000 - 1,000,000
23. JOINTLY CONTROLLED ASSETS The consolidated entity had interests in unincorporated joint ventures at 30 June 2009 as follows:
Percentage Interest 2009
Percentage Interest 2008
South Australia Moonta Porphyry Joint Venture (Note a) – Copper/Gold Exploration 90% 90% Kimba-Verran Joint Venture (Note a) – Copper/Gold Exploration 90% 90% Eyre Peninsula Uranium Joint Venture (Note b) – Uranium Exploration 100% 100% Colona Joint Venture - Mineral Sands Exploration - 49%
Notes:
(a) The consolidated entity has an option to purchase the remaining 10% at any time for a consideration of $200,000 cash or the equivalent of $200,000 in Adelaide resources Limited shares.
(b) Under the terms of this joint venture agreement, Quasar Resources Pty Ltd is required to spend
$3,000,000 over four years commencing 1 January 2007 to earn a 60% interest, with a minimum of $750,000 to be spent per year over the term of the joint venture.
After Quasar Resources Pty Ltd earns its 60% interest, the consolidated entity may elect to contribute and hold its equity position, contribute or dilute on a program by program basis, or immediately revert to a 25% equity in the joint venture, free carried to a decision to mine. If the
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consolidated entity chooses the dilution path, its interest may not be diluted below 25%, at which time the interest will be free carried through to a decision to mine. If the consolidated entity elects not to contribute to mine development, it can opt to sell or revert to a 2% revenue based royalty.
The amount included in mining tenements, exploration and evaluation (Note 8) includes $847,355 (2008: $1,218,967) relating to the above joint ventures.
24. COMMITMENTS FOR EXPENDITURE AND CONTINGENT LIABILITIES
(a) Exploration Expenditure Commitments
The consolidated entity has certain obligations to perform exploration work and expend minimum amounts of money on such works on mineral exploration tenements.
These obligations will vary from time to time, subject to statutory approval. The terms of current and future joint ventures, the grant or relinquishment of licences and changes to licence areas at renewal or expiry, will alter the expenditure commitments of the company.
Total expenditure commitments at balance date in respect of minimum expenditure requirements not provided for in the financial statements are approximately:
2009 $
2008 $
Not later than one year: 1,480,000 1,809,000 Later than one year but not later than two years: 1,905,000 1,844,750 Later than two years but not later than five years: 5,699,000 6,074,250
(b) Rover Project – Northern Territory Under an agreement entered into with Newmont Gold Exploration Pty Ltd (“Newmont”) on 28 February 2005, Adelaide Exploration Limited acquired a 100% interest in the Rover Project exploration licences and exploration licence applications located near Tennant Creek, Northern Territory, on the following terms.
• A minimum of $400,000 to be spent on exploration activities within 18 months of approval being received from the Central Land Council. This obligation had been met by December 2005.
• A net smelter return royalty to Newmont ranging from 1.5% to 2.5% after production, and
• The grant of an option to Newmont to buy back a 70% interest should a resource of more than 2 million gold ounces be discovered, by paying Adelaide Exploration Limited the lesser of $A20 million or three times the expenditure by Adelaide Exploration Limited from the date of execution of the agreement.
• Under an agreement entered into with Adelaide Exploration Limited, Adelaide Resources Limited and Franco-Nevada Australia Pty Ltd (“Franco”) dated 11 February 2009, Newmont assigned its interest in the royalty to Franco.
(c) Newcrest Mining Royalty Deed
By a Royalty Deed dated 13 February 2002 the consolidated entity is obliged to pay to Newcrest Mining Limited a royalty of 1.5% of the gross proceeds received from the sale of refined minerals, less allowable deductions, mined from certain tenements on the Eyre Peninsula, South Australia.
(d) Service Agreements
The consolidated entity entered into service agreements with an entity associated with C G Drown for a term of three years from 5 November 2007 and a consultancy agreement with an entity associated with J P Horan for a term of two years from 1 October 2007, extended for a further 12 months. For the year ended 30 June 2008 the consolidated entity had service agreements with entities associated with C G Drown and J P Horan.
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Should any of the above agreements be terminated by the company earlier than their expiry date, a contingency exists for the contracted amount payable to the end of their terms. The entities associated with C G Drown and J P Horan may terminate their agreements with three months notice. As at 30 June 2009, the consolidated entity had a contingent liability in relation to these agreements of $291,124 (2008: $538,846).
Details of the current services and consultancy agreements are set out below:
2009 Director Terms C G Drown Daily rate of $950 for a minimum of 218 days per annum J P Horan Daily rate of $960 for a minimum of 90 days per annum
2008
Director Terms C G Drown Daily rate of $950 for a minimum of 218 days per annum J P Horan Daily rate of $960 for a minimum of 90 days per annum
The consolidated entity also entered into a consultancy agreement with J J den Dryver on 28 May 2008 to provide consulting services on an as needs basis at the rate of $1,300 per day (previously the rate was $1,000 per day).
(e) Native Title
Native Title claims have been made with respect to tenements in South Australia in which Adelaide Resources Limited has interests. The consolidated entity is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the company or its projects.
(f) Bank Guarantees As at 30 June 2009, the consolidated entity had given a bank guarantee of $50,000 (2008: $50,000) to the Central Land Council, Northern Territory, as a performance bond.
As at 30 June 2009, the consolidated entity had given a bank guarantee of $10,000 (2008: $Nil) to the Minister for Mineral Resources Development, South Australia, for an environmental bond.
As at 30 June 2009, the consolidated entity and the company had given a bank guarantee of $32,500 (2008: $Nil) to Pink Pumpkin Pty Ltd as a lease bond.
(g) Operating Lease
Operating lease relates to the lease of office space with a lease term of four years, with an option to extend for a further four years. The operating lease agreement contains a market review clause in the event that the Group exercises its option to renew. The Group does not have an option to purchase the leased asset at the expiry of the lease period.
Non-cancellable operating lease commitments Consolidated Company
2009 $
2008 $
2009 $
2008 $
Not longer than 1 year 70,940 70,752 70,940 70,752 Longer than 1 year and not longer than 5 years 79,972 157,106 79,972 157,106 Longer than 5 years - - - 150,912 227,858 150,912 227,858
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25. FINANCIAL INSTRUMENTS
Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in notes 16, 17 and 18 respectively.
Due to the nature of the Group’s activities (exploration) the directors believe that the most advantageous way to fund activities is through equity. The Group’s exploration activities are monitored to ensure that adequate funds are available. Categories of financial instruments
Consolidated Company
2009
$ 2008
$ 2009
$ 2008
$ Financial assets Cash and cash equivalents 6,179,379 3,657,746 2,084,652 3,647,246 Loans and receivables 323,533 160,280 9,820,840 8,046,386 Available-for-sale financial assets 201,550 252,980 201,550 252,980 Shares and share options in Iron Road Limited 40,072 7,665,000 40,072 7,665,000 Financial liabilities Amortised cost 391,801 701,437 391,801 701,437
Interest rate risk management The company and the Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period.
At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s and company’s net profit would increase/decrease by $24,593 and $14,330 respectively (2008: increase/decrease by $20,207 and $20,155 respectively). This is mainly attributable to interest rates on bank deposits.
The group’s sensitivity to interest rates has not significantly changed from the prior year. Other price risks The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather trading purposes. The Group does not actively trade these investments. Equity price sensitivity The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date.
At reporting date, if the equity prices had been 5% pa higher or lower:
• net profit for the year ended 30 June 2009 would have been unaffected as the equity investments are classified as available-for-sale; and
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• other equity reserves would increase/decrease by $12,082 (2008: increase/decrease by $395,899) for the Group and Company, mainly as a result of the changes in fair value of available-for-sale shares.
The group’s sensitivity to equity prices has decreased during the current year mainly due to the in-specie distribution of Iron Road Limited shares and share options. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from activities.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves. Liquidity and interest risk tables The following table details the company’s and the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Consolidated and Company
Weighted average effective interest
rate Less than one
year % $ 2009 Non-interest bearing - 391,801 2008 Non-interest bearing - 701,437
Fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows:
• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.
• the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.
Quoted prices Financial assets in this category include income notes, shares and share options. The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximates their fair values.
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26. SEGMENT INFORMATION
The consolidated entity operates in the mineral exploration industry in Australia. 27. EARNINGS PER SHARE Consolidated
2009 Cents per share
2008 Cents per share
Basic earnings per share – Profit / (loss) 4.86 (1.10) Diluted earnings per share – Profit / (loss) 4.62 (1.10)
Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
$ $ - Earnings 4,038,576 (887,701)
Number Number - Weighted average number of ordinary shares 83,156,035 80,405,658
Diluted earnings per share The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
$ $ - Earnings 4,038,576 (887,701)
Number Number - Weighted average number of ordinary shares 87,424,049 80,405,658
28. CONTROLLED ENTITIES
Ownership Interest
Name of Entity Country of Incorporation
2009 %
2008 %
Parent Entity Adelaide Resources Limited
(i)
Australia
-
-
Subsidiaries Adelaide Exploration Pty Ltd
(ii)
Australia
100
100 Eyre Energy Pty Ltd (ii) Australia 100 100
(i) Head entity in tax consolidated group (ii) Members of tax consolidated group
29. SHARES AND OPTIONS IN IRON ROAD LIMITED
On 18 February 2008 the company announced that it had executed a sale agreement with Iron Road Limited to vend the Warramboo Iron Project into that company. Consideration for the sale was 21 million shares in Iron Road Limited. Under the sale agreement with Iron Road Limited the company agreed to undertake an in-specie distribution of the 21 million shares it received to the company’s shareholders, subject to shareholders’ approval.
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A general meeting of the company’s shareholders, held on 12 August 2008, approved the in-specie distribution of the 20,789,255 shares the company holds in Iron Road Limited.
The distribution was approved subject to the receipt of a private ruling on the tax consequences for the company of the in-specie distribution, and a class order in relation to the tax consequences for the shareholders of Adelaide Resources Limited of the in-specie distribution (collectively the “tax ruling”) from the Australian Tax Office (“ATO”).
As the tax ruling had not been received prior to Iron Road Limited announcing a rights issue of share options, the company participated in the share option issue and received 10.5 million share options.
On 7 November 2008 the company received indications from the ATO that a favourable tax ruling would be issued. Subsequently, on 17 December 2008, the ATO published its ruling.
At the Annual General Meeting of the company’s shareholders held on 17 November 2008, the shareholders approved the in-specie distribution of 10,394,901 share options the company held in Iron Road Limited.
As the shareholders of the company at the above meetings approved a capital reduction for the original cost of the shares and share options in Iron Road Limited that would be distributed via in-specie distribution, the issued capital was reduced by the original cost of the shares and share options distributed. For accounting purposes, the in-specie distribution has been accounted for at “fair value” with the difference between original cost and fair value being reported in accumulated losses.
30. NOTES TO THE CASH FLOW STATEMENT
Inflows/(Outflows) Consolidated Company
2009 $
2008 $
2009 $
2008 $
(a): Reconciliation of loss for the period to net cash flow from ordinary activities.
Profit / (Loss) for the period 4,038,577 (887,701) 7,371,239 (1,896,379) Interest revenue (316,332) (297,245) (315,993) (296,745) Share based remuneration 11,812 97,677 11,812 97,677 Revaluation of options (101,582) - (101,582) - Gain as a result of in-specie distribution of shares in Iron Road Limited
(727,615)
-
(727,615)
-
Depreciation 30,332 22,370 30,332 22,370 Profit on sale of plant and equipment (863) - (863) - Profit on sale of tenements (3,745,238) - - - Exploration written off 119,489 176,665 - - Impairment of receivables - - (5,881,060) 1,616,919 (Increase) decrease in receivables (163,253) (75,966) (148,774) (75,966) (Increase) decrease in deferred tax asset - 6,035 (38,509) (426,041) Increase/(decrease) in payables 87,886 (289,806) (312,004) (289,806) Increase/(decrease) in provisions (8,597) 3,606 (8,598) 3,606 Net operating cash flows (775,384) (1,244,365) (121,615) (1,244,365)
(b) Non-cash investing and financing activities
During the year the company and the consolidated entity made an in-specie distribution of 20,789,255 shares and 10,394,901 share options in Iron Road Limited.
During the previous year the company and the consolidated entity sold the Warramboo Iron Project for 21 million shares in Iron Road Limited.
These transactions are not reflected in the cash flow statement.
652009 Annual Report 65
Page 40
Directors’ Declaration The directors declare that: (a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to
pay its debts as and when they become due and payable; (b) In the directors’ opinion, the financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and consolidated entity; and
(c) The directors have been given the declaration required by Section 295A of the Corporation Act 2001. Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the Corporations Act 2001. On behalf of the directors C G Drown J P Horan Director Director Adelaide, South Australia 16th September 2009
Page 40
Directors’ Declaration The directors declare that: (a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to
pay its debts as and when they become due and payable; (b) In the directors’ opinion, the financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and consolidated entity; and
(c) The directors have been given the declaration required by Section 295A of the Corporation Act 2001. Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the Corporations Act 2001. On behalf of the directors C G Drown J P Horan Director Director Adelaide, South Australia 16th September 2009
66 Adelaide Resources Limited66
Liability limited by a scheme approved under Professional Standards Legislation.
37 to65.
672009 Annual Report 67
We have audited the Remuneration Report included in pages 30 to 34 of the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Adelaide Resources Limited68
Shareholder Information
Substantial ShareholdersThe names of substantial shareholders shown in the company’s share register are:
Shareholder Number of SharesLoftus Lane Investments Pty Limited 5,918,618Equities and Freeholds Limited 5,909,618Keith Yates & Associates Pty Ltd<Yates Family Super Fund A/C> 3,316,130
Distribution of Shareholders
Number of ordinary shares held No. of Holders Ordinary shares1-1000 69 49,0121,001 – 5,000 407 1,307,0685,001 – 10,000 440 3,841,55110,001 – 100,000 830 30,107,998100,000 – Over 132 47,850,406
1878 83,156,035
All ordinary shares carry one vote per share without restriction.
At the closing price on SEATS at 16 September 2009 there were 114 shareholders with less than a
marketable parcel of 1695 shares.
Top 20 Shareholders of ordinary shares
Issued Shares % Shares Loftus Lane Investments Pty Limited 5,918,618 7.12Equities and Freeholds Limited 5,909,618 7.11Keith Yates & Associates Pty Ltd <Yates Family Super Fund A/C> 3,316,130 3.99Keith Robert Yates 2,427,278 2.92Adelaide Resource Management Pty Ltd 1,500,000 1.80Weldbank Pty Ltd 1,185,693 1.43Valnera Holdings Pty Ltd 1,000,000 1.20Merrill Lynch (Australia) Nominees Pty Limited <Berndale A/C> 725,000 0.87Dorran Pty Ltd 516,130 0.62Ian Lloyd Richards 516,130 0.62New England Specialty Poultry Pty Ltd <Super Benefits Fund A/C> 515,000 0.62Henry Young & Sons Pty Ltd 491,500 0.59Walker & Hall Fine Gifts Ltd 485,000 0.58Jeach Pty Ltd <Pippi Super Fund A/C> 470,000 0.57Nicholas Mather & Judith Mather <Mather Super Fund A/C> 463,000 0.56Chris Drown & Lynette Drown <C&L Drown Family A/C> 450,000 0.54Comsec Nominees Pty Ltd 447,366 0.54Dean Wilfred Hosking & Judith Esme Hosking 416,130 0.50Austin Joseph Carew <Share Trading A/C> 410,000 0.49Howard Yates & Peta Yates <Yates Family Super Fund A/C> 400,226 0.48Total of top 20 holdings 27,562,819 33.15Other holdings 55,593,216 66.85Total fully paid shares issued 83,156,035 100.00
OptionsThere are 4,300,000 unlisted options held by employees under the company’s Employee Share Option
Plan and by directors.
as at 16 September 2009
2009 Annual Report 69