Annual Report 2011
Corporate directory
ABN 46 106 346 918
DIRECTORSAnthony Paul Rovira (Executive Chairman)
Dr Wolf Martinick (Non-Executive Director)
John Walter Saleeba (Non-Executive Director)
COMPANY SECRETARYBrett Dickson
REGISTERED OFFICELevel 1, 30 Richardson StreetWEST PERTH WA 6005(08) 9481 2555
SOLICITORSMiddletonsLevel 32, 44 St. Georges TerracePERTH WA 6000
BANKERSCommonwealth Bank of Australia Limited
SHARE REGISTERComputershareLevel 2, 45 St Georges TerracePERTH WA 6000Telephone: (08) 9445 7000Facsimile: (08) 9445 7677
AUDITORSBDO Audit (WA) Pty Ltd38 Station StreetSUBIACO WA 6008
INTERNET ADDRESSwww.azureminerals.com.au
ASX CODEShares AZS
1
Azure Minerals Limited annual report 2011
• Operatingintheworld-renownedSierraMadreOccidentalMineralProvinceinMexico
• Areasoffocus:
-ElTecoloteDistrict
-SanFranciscoManganeseProject
-PromontorioCopperProject
• ElTecoloteDistricthosttothreeadjoining100%ownedprojectstotaling600km2
• SecondJVwithJapaneseGovernmentorganisation,JOGMEC,enteredintoontheElTecoloteProjectwithUS$1.5Mexplorationbudgetfor2011
• LaTortugaJVwithJOGMECprogressingwith13drillholesand4,560mdrillingundertakentodate
• OZMineralsspendsUS$700,000onSanEduardoJVpriortodeparting
• SignedacquisitiondealontheSanFranciscoManganeseProjectwhichhasrecentproductionhistoryandsignificantupsidepotential
• Announcedmaiden JORCMineralResourceEstimate (Inferred)of1,045,000 tonnes@30%Mn for312,000 tonnes containedmanganeseatSanFrancisco
• DiamonddrillingprogramcompletedatPromontorioandCascada
• Promontoriostrikelengthdoubledto400m
• Cascadanewbulktonnagegold-silverzoneidentifiedintersecting137mgoldmineralisation,openatdepth
• SignificantopportunitiestoincreaseresourcebaseinMexico
• PositiveCompanyoutlookforthecomingyear
CONTENTS
Chairman’s Letter 2
Review of Operations 4
Directors' Report 9
Corporate Governance Statement 19
Financial Statements
- Statement of Comprehensive Income 24
- Statement of Financial Position 25
- Statements of Changes in Equity (Consolidated) 26
- Statement of Cash Flows 27
- Notes to the Financial Statements 28
- Directors' Declaration 56
- Independent Audit Report 57
- Auditor’s Independence Declaration 59
ASX Additional Information 60
HIGHLIGHTS
Competent Person Statement:
Information in this report that relates to
Exploration Results and Mineral Resources is
based on information compiled by Mr Tony Rovira,
who is a Member of The Australasian Institute of
Mining and Metallurgy. Mr Rovira is a full-time
employee of Azure Minerals Limited. Mr Rovira
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 Reser ves”. Mr Rovira
consents to the inclusion in the documents of the
matters based on his information in the form and
context in which it appears.
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Dear Fellow Shareholders,
OnbehalfoftheBoardofAzureMinerals,itismypleasuretopresenttoyoutheAnnualReportfor2011.
Overthepast12monthstheCompanyhasfocuseditseffortsonthreesignificantproperties;theElTecoloteDistrict,theSanFranciscoManganeseMineandthePromontorioCopperProject.Eachofthesekeyareasoffersanopportunitytoincreaseourresourcebase,therebyadvancingAzuretowardsitsgoalofbecominganindependentmineralsproducerMexico.
Mexican focus taking shape
Ourprojectsarelocatedintheworld-renownedSierraMadreOccidentalMineralProvinceinnorthernandcentralMexico.Eventoday, thisremainsarelativelyunder-exploredyetrichlymineralisedpartoftheworldthat IbelieveoffersoutstandinggrowthopportunitiesforAzure.
KeyfactorsthatcontributetoMexicobeingconsideredoneofthemostfavourablecountriesintheworldformininginvestmentinclude low sovereign risk, strongpublic andgovernment support formining andanestablishedmining culture.Thepast yearhasstrengthenedourviewthatMexicoisanoutstanding locationforexplorationandminingandwithAzure’s longin-countryexperienceandstrongworking relationshipswith industryandgovernment,webelieve that theCompanywillhavesignificantgrowthopportunitiesintheyearstocome.
El Tecolote District
OurlargelandholdingwithintheElTecoloteDistrictishometothreekey100%-ownedprojects.Situatedadjacenttooneanother,theSanEduardo,ElTecoloteandLaTortugapropertieshostabundantevidenceofbasemetalmineralisationwithpotentialforbothporphyrycopperandskarncopper-zincdeposits.
InAprilthisyear,weenteredintooursecondJointVenture(‘JV’)withtheJapaneseGovernmentorganisation,JOGMEC,coveringtheElTecoloteproject.UnderthetermsoftheJV,JOGMECmayearnupto70%projectequitybyspendingUS$13millionwithinasixyearperiod.FollowingonfromourLaTortugaJV,thisnewagreementhasfurtherstrengthenedourgoodrelationshipwiththisdynamicorganisation.
TheElTecolotepropertycontainsthenow-closedElTecoloteMine,alargescalecopper-zinc-silverminingandprocessingventure.ItistheCompany’sbeliefthatthereisverystrongpotentialforadditionalbrownfieldsdiscoverieswithinthisdistrictandthisviewissharedbyourJVpartner.
AzurehasalsoidentifiedothercopperoccurrenceswithinElTecolote,notablytheReynadelCobreprospect.RecentdrillingbyAzureintersectedmultiplemineralizedzones,withabest interceptof11.0m @ 1.3% Copper, 3.0% Zinc, 7.1g/t Silver, 17.2g/t Indium & 31.9% Iron.
TheJVhasallowedAzuretocommenceanintensiveUS$1.5millionexplorationprogramfor2011,including:
• Geologicalmappingandsurfacesampling
• Airbornemagneticandelectromagneticsurveys
• InducedPolarisationandgroundmagneticsurveys
• Diamondcoredrilling
ExplorationhasalsocontinuedattheLaTortugaJV,whereJOGMECisearning51%through$3mexpenditure.Todate,13diamonddrillholestotalling4,560metreshavetestedseveralcoppertargetsandwidespreadanomalousmineralisationcontinuestoprovideencouragementforthisprojectwhileseveralpromisingtargetsremaintobetested.
AtSanEduardo,weweredisappointedtoannouncethedepartureofOZMineralsLtdfromtheJV.WithtotalexpenditureofUS$700,000,numeroustargetswereidentified,andwhilstthisJVhascometoanend,westronglybelievethattheSanEduardoproject remains veryprospective.Azure retains100%project equity andotherpotential JVpartnershaveexpressed interest.Meanwhileexplorationofkeytargetsshowingsignificantpotentialisongoing.
CHAIRMAN’S LETTER
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San Francisco
DuringthecourseoftheyearAzureenteredintoanoptionagreementtoacquire100%oftheSanFranciscoManganeseProject,locatedinJaliscoState,Mexico.Witharecentproductionhistory,significantupsidepotentialandlocatedclosetokeytransportinfrastructure,SanFranciscoisaprimefocusforAzure.
FollowingcompletionoftheinitialDueDiligencestudyanddrillingprogram,AzureannouncedamaidenJORCMineralResourceestimate(Inferred)of1,045,000tonnes@30%Mnfor312,000tonnesofcontainedmanganese.Postyearendwecommencedresourceexpansiondrillingandadditionalfeasibilitystudyactivities,andthesearecontinuingtoassisttheCompanyindeterminingwhethertoproceedtoexercisetheoptiontopurchase.
Promontorio
We have continued to progress our Promontorio Copper Project which contains a JORCMineral Resource (Indicated andInferred)of502,[email protected]%Copper,2.1g/tGoldand99g/tSilver.
AzurerecentlycompletedadiamonddrillingprogramtestingextensionsofthePromontoriodepositandthenearbyCascadagoldprospect.AnumberofimpressiveintersectionswereyieldedandtheCompanyannouncedadoublingofthePromontoriostrikelengthto400metresandanewhighgradecopper-goldbearingveinlocatedtothewestoftheexistingresource.AtCascadaanewbulktonnagegold-silverzonehasbeenidentifiedanddrillingintersected137mofgoldmineralisation,whichremainsopenatdepth.
InclosingIlookforwardtonextyearbringingfurthersuccessinMexicoaswecontinueinourquesttobecomeanindependentmineralsproducer.
Ithankourshareholders,partnersandemployeesfortheirongoingsupportandlookforwardtobringingyoumoregoodnewsthroughoutthecourseofthecomingyear.
Tony RoviraExecutiveChairman
Azure Minerals Limited – 2011 Annual Report
5
and a new high grade copper-gold bearing vein located to the west of the existing resource. At Cascada a new bulk tonnage gold-silver zone has been identified and drilling intersected 137m of gold mineralisation, which remains open at depth.
In closing I look forward to next year bringing further success in Mexico as we continue in our quest to become an independent minerals producer.
I thank our shareholders, partners and employees for their ongoing support and look forward to bringing you more good news throughout the course of the coming year.
Tony RoviraExecutive Chairman
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Azure Minerals Limited (‘Azure’) has had another successful 12 months on the ground in Mexico. Exploration activities focused on three key areas: the El Tecolote District, the San Francisco Manganese Project and the Promontorio Copper-Gold-Silver Project.
EL TECOLOTE DISTRICT (Copper & Zinc)
Azurehas100%ownershipofa600km²strategictenementholdingintheElTecoloteDistrict,locatedinSonoraState,Mexico.Theareacomprisesthreeadjoiningproperties:ElTecolote,LaTortugaandSanEduardowhichareprospectiveforporphyry-hostedcopperandskarncopper-zincdeposits.
Ajointventureagreement(JV)betweentheJapanOil,GasandMetalsNationalCorporation(‘JOGMEC’)andAzurewasestablishedin2008fortheLaTortugaProjectwithJOGMEChavingtherighttoearna51%interestbysolefundingUS$3millionexpenditureoverathreeyearperiod.
Inthisfinancialyear,JOGMECsignedasecondJVwithAzuretoacquireapotential70%interestintheElTecoloteProjectbyspendingatotalofUS$13million.
JOGMECisawholly-ownedJapaneseGovernmentcorporationestablishedtoassistinthestablesupplyofoil,gasandmineralresourcestotheJapaneseeconomy.TheCompany’smissionistogainentryintohigh-potentialmineralexplorationprojectsthroughprovidingfundingandtechnicalassistance.JOGMEC’sinvolvementintwoofourprojectsdemonstratestheirbeliefinthestrengthofourMexicanassetsandourMexicanteam,andwelookforwardtofurthercementingthisbeliefthroughongoingexplorationsuccess.
El Tecolote
SituatedbetweenAzure’sSanEduardoandLaTortugaprojectareas,ElTecoloteisa150km²propertycontainingabundantevidenceofbasemetalmineralisationwithpotentialforbothporphyrycopperandskarncopper-zincdeposits.Itcontainsthehistoricskarn-hostedElTecoloteCopper-Zinc-SilverMinewhichoperatedbetween1939-1944and1978-1984,[email protected]%copper,7.02%zinc and47g/t silver. Lowcommodityprices forced themine to close in1984,withunminedcopper and zincmineralisationremainingaroundtheoldmineworkings.PriortoAzure’sinvolvement,nomodern-dayexplorationhadtakenplacearoundthemineandsignificantfurtherpotentialexistsalongstrikeandatdepthformineralisedextensionsandnewdeposits.
During thecourseof theyear,exploration, includinggeologicalmapping, rockchipsampling,geophysical surveysanddiamonddrillingreturnedencouragingresultsatseveralprospectswithintheElTecoloteprojectarea.
Inthesouthernpartoftheproperty,samplingattheReynadelCobreprospect(looselytranslatedtomean‘CopperQueen’)returnedgradesatsurfaceofupto3.7%copper,5.4%zincand26g/tsilver.Follow-updiamonddrillingintersectedmultipleskarnzonescontainingmassivesulphidecopperandzincmineralisationinallfourholes,goodgoldgradesupto2.3g/tAuwerealsopresent..Thebestmineralisedinterceptsincluded:
• 11m @ 1.3% Copper, 3.0% Zinc, 7.1 g/t Silver, 17.2 g/t Indium and 31.9% Iron
• 4.0m @ 1.2% Copper, 4.6% Zinc, 3.8g/t Silver, 20.8g/t Indium & 19.1% Iron
Adetailedgroundmagneticsurveyhasbeencompletedtoprovidea3-DmodelofthemagneticskarnhostatReynadelCobrewhichwillbetestedfurtherbydeepdiamonddrilling.
TheMonarcagoldmineralisedshearzonewasidentifiedinthenorthernpartoftheprojectarea.Historicalmineworkingswithshaftsupto30mdeepandnearbyalluvialgoldworkingsindicatethepresenceofsignificantgoldinthismineralisedsystem.Resultsfromthreedrillholesconfirmedthepresenceofanarrowshearzonecontaininggoldvaluesofupto5.4g/tAu.
Mostnotably, inAprilAzure agreed toenter into aUS$13million farm-in JV agreementwith JOGMECcovering thisproject.UnderthetermsoftheJV,JOGMECmayspendUS$5milliononexplorationoverthenextthreeyearstoearnaninitial51%interest,andanadditional19%stakecanthenbeearnediftheyelecttospendafurtherUS$8millionthroughoutthesubsequentthreeyears,takingtotalprojectequityto70%forUS$13millioninexpenditure.
ThisJVhasenabledAzuretocommenceanactiveUS$1.5Mexplorationprogramincluding:
Geologicalmappingandsurfacesampling
Airbornemagneticandelectromagneticsurveys
InducedPolarisation(IP)andgroundmagneticsurveys
Diamondcoredrilling
Thisexplorationprogramwillcontinuethroughouttheremainderof2011and,pendingpositiveresults,AzureanticipatesthatafurtherUS$1.5MexplorationprogramwillbeundertakenonElTecolotein2012,aspertheagreedconditionsoftheJV.
Review of Operations
5
La Tortuga
TheLaTortugaProject,consistingofAzure’s100%ownedLaTortugaandLosNidosproperties,covers213km².In2008,Azureenteredintoa JVwhereby JOGMECcouldearna51%interest intheprojectbyspendingUS$3million.At lastupdate, JOGMEChas fundedapproximatelyUS$1.9millionofexpenditure.
During theyear the JVcompleteddrilling sixdiamonddrill holes totaling1,815mwhich tested several separate targets identifiedbyanomalous surfacegeochemistryandgeophysical (IPandaeromagnetic) surveys.Zonesofalteredandquartzveinedporphyrywereintersectedreturninganomalousgradesofcopper.TheseresultsprovideencouragementthatLaTortugaremainsprospectiveforporphyrycopperdepositsandfurtherworksisbeingplannedfortheforthcomingyear.
San Eduardo
SanEduardo,a234km²propertywhollyownedbyAzure,isprospectiveforporphyry-hostedcopperandskarncopper-zincmineralisationandadjoinsthewesternboundaryoftheElTecoloteproject.
Throughoutthisyear,explorationwasundertakenonSanEduardothroughtheJVwithAustraliancopperminingcompany,OZMineralsLtd.Explorationactivitiescomprisedgeologicalmapping,surfacegeochemicalsampling,andnumerousgeophysicalsurveys(airborneandgroundmagnetics,radiometrics,andIP).Fromthiswork,aporphyrycoppertargetwasidentifiedandtestedbydrillingone600mdeepdiamonddrillhole.Thisdrillholeintersectedwidezonesofstronglyalteredandquartzveinedporphyrycontainingsubstantialquantitiesofpyrite,withminoramountsofcopperoxideandcoppersulphidemineralisation.
OZMineralsconsideredthatthegeophysicalandgeochemicalanomalismwhichidentifiedthetargetwasexplainedbythepresenceofthepyriteandcoppermineralisationobservedinthedrillcore,andwithdrewfromtheJVon30thJune2011.Uponwithdrawal,OZMineralsretainednointerestintheprojectandAzureretainsits100%projectownership.
Duringtheperiodofthe JV,OZMineralsspentapproximately$700,000onexplorationactivities.The largeamountoftechnicaldatacollectedthroughthisworkhighlightedtheextensiveprospectivityofSanEduardowithnumerousporphyrycopperandskarncopper-zinctargetsidentified.Thesetargetsremainuntestedtodateandfollow-upexplorationiscontinuing.
SAN FRANCISCO (Manganese)
Azurehasenteredintoanoption,subjecttoasatisfactorytechnicalandcommercialevaluation,toacquire100%ownershipoftheSanFranciscoManganeseProject,locatedinJaliscoState,Mexico.
AzureappointedCoffeyMiningPtyLtd(‘Coffey’) toundertakeahigh level technicalstudyandtoproducean IndependentTechnicalReport. This includedestimationofaMineralResourcereported inaccordancewiththe JORCCode,metallurgical testwork,mining,processandinfrastructuredesignaswellasanestimationofoperatingandcapitalcosts.
Toassistwiththeresourcecalculationandtotestadditionalexplorationpotential,Azurecompletedatenhole(1,966m)diamonddrillingprogramintoandaroundthedeposit,andiscurrentlyundertakingfurtherresourceexpansiondrilling.
Resource Estimation
ThemaidenJORCMineralResourceestimatefortheSanFranciscoManganeseProject1standsat:
CATEGORY TONNESGRADE(% Mn)
CONTAINED MANGANESE(Tonnes)
Inferred 1,045,000 30 312,000
Exploration Potential
Resultsofthedrillingwerepositive,withtheresourceremainingopentothenorthandnorthwestathighmanganesegrades.Additionalexplorationsuccessinthisareaislikelytoaddsignificantlytotheresourcebase,withanExplorationTargetidentifiedofanadditional2to4 million tonnes @ 30% - 40% Mn2.Resourceexpansiondrillingiscurrentlyinprogress.
Mining
Severalminingmethodswereinvestigated,withCoffeyrecommendingthatthedepositcanbeeffectivelyminedbymechanisedroomandpillarundergroundminingmethods.
Processing
Metallurgicaltestingindicatedthattheorecanbesuccessfullybeneficiatedtoproduceafinalconcentrategradeofbetween35%Mnto50%MnusingacrushingandDenseMediaSeparationcircuitwithrecoveriesof88%to67%respectively.Anaveragefinalproductgradeof43%Mnwasindicatedata75%Mnrecovery.
1DetailsoftheresourcesclassificationandestimationmethodologiesarecontainedinAzure’sannouncementtotheASX,releasedon14thJune2011.2ThepotentialquantityandgradeoftheExplorationTargetisconceptualinnature,andtherehasbeeninsufficientexplorationtodefineaMineralResourceanditisuncertainiffurtherexplorationwillresultinthedeterminationofaMineralResource
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Project Economics
Thestudy,whichwascompletedataconceptstudylevel,returnedthefollowinginitialestimatesofoperatingandcapitalcosts:
• MineoperatingcostsofapproximatelyUS$20/tore• ProcessoperatingcostsofapproximatelyUS$2.60/tofmillfeed• TransportofconcentratefromsitetoFOBattheManzanilloPortofapproximatelyUS$25/tofconcentrate• TotaloperatingcostsofapproximatelyUS$100/tofconcentrate• ConcentratevalueofapproximatelyUS$300/tat43%Mnanda$7/dmtuMnprice
Acquisition Agreement
Under the termsof theoption and acquisition agreement,Azure can gain 100%ownershipof the project for a total considerationofUS$15millionpayableacrosssixtranchesbetweenDecember2011andDecember2014. It isexpectedthatthemajorityoftheconsiderationwillbefundedfromprojectcashflowfollowingthecommencementofproduction.
The Way Ahead
Azure’sProjectManager,MrGaryLeighton,isaveryexperiencedminedevelopmentengineerandwillleadthedevelopmentoftheSanFranciscoProject.Thisprogramwillcomprisefurtherdrillingtoexpandtheresourcebase,tobefollowedbyessential feasibilitystudyactivities,includingadvancedstagemetallurgicaltestworkandprocessengineeringdesign.
Azureretainstherighttowithdrawfromtheprojectandthepaymentscheduleatanytimeduringtheacquisitionprocess,inwhichcasetheprojectownershipwillrevertbacktothevendorandAzurewillhavenofurtherobligations.
PROMONTORIO (Copper-Gold-Silver)
The Promontorio Project is located in the richlymineralised SierraMadreOccidentalmining province in Chihuahua State,Mexico.It contains a high grade copper-gold-silver deposit hosted in veins ofmassive and semi-massive sulphides, with significant additionalexplorationpotential.TheJORCMineralResources(IndicatedandInferred)forthePromontorioProject3currentlystandsat:
CATEGORY TONNESGRADE(% Cu)
GRADE(g/t Au)
GRADE(g/t Ag)
CONTAINEDCOPPER(Tonnes)
CONTAINEDGOLD
(Ounces)
CONTAINEDSILVER
(Ounces)
Indicated 290,000 4.2 2.1 94 12,100 20,000 873,000
Inferred 212,000 5.3 2.1 106 11,300 14,000 724,000
TOTAL 502,000 4.7 2.1 99 23,400 34,000 1,598,000
Thedepositisopeninalldirectionswithpotentialtoexpandtheresourcebydrillingalongstriketothenorthandsouth,aswellasdeeperdrillingofthedepthextensionsofthehighgradeveins.
ThePromontorioprojectareaislocatedwithintheboundariesoftheTutuacaProtectNaturalArea.TheMinistryofEnvironmentandNaturalResources(‘SEMARNAT’)oftheMexicanFederalGovernmentrequestedanEnvironmentalImpactStatement(‘EIS’)besubmittedpriortothecommencementofdrillingactivities.SEMARNATgrantedapprovalforthedrillingprograminMarchandthedrillingofa12hole,programfor2,746mwascompletedinJuly2011.
Drillingtargetedthefollowinglocations:
• AlongstriketothenorthofthePromontorioresource(sixholes)• Depthextensionsbeneaththemiddleoftheresource(twoholes)• Alongstriketothesouthoftheresource(twoholes)• AttheCascadagoldprospect(twoholes)
Assayresultsfromthisdrillingwereencouraging;withmineralisationbeingintersectedinthemajorityofholes.TheCompanyconsidersitlikelythatwithinfilldrilling,anupgradeoftheexistingMineralResourcecanbeanticipated.DetailsofdrillholeinterceptsandlocationsarecontainedinTables1&2.
3DetailsoftheresourcesclassificationandestimationmethodologiesarecontainedinAzure’sannouncementtotheASX,releasedon7thJanuary2009.
Review of Operations (cont’d)
7
TABLE 1 – PROMONTORIO PROJECT – SIGNIFICANT DRILL HOLE INTERSECTIONS
HOLE NOFROM
(m)TO(m)
WIDTH(m)
COPPER(%)
GOLD(g/t)
SILVER(g/t)
PROMONTORIO
APR-DD-043 151.2 152.9 2.7 0.83 4.0 40
APR-DD-044 116.2 116.5 0.3 1.39 8.5 107
And 142.5 143.9 1.4 1.87 2.2 44
APR-DD-045 122.6 123.9 1.3 0.12 1.3 20
APR-DD-046 75.7 78.0 2.3 2.90 6.0 106
APR-DD-048 200.55 201.3 0.75 5.16 0.4 190
APR-DD-050 18.0 21.7 3.7 8.83 6.6 57
And 193.7 195.4 1.7 1.59 0.5 18
APR-DD-051 218.3 223.9 5.6 2.53 0.4 26
Including 218.3 220.45 2.15 1.86 0.5 18
And 223.0 223.9 0.9 9.85 1.0 75
CASCADA
APR-DD-054 48.3 185.6 137.3 - 0.42 6
FurtherexplorationatPromontorioisplannedduringtheforthcomingyearandAzureremainsconfidentofcontinuedpositiveresults.
TABLE 2 – PROMONTORIO PROJECT - DRILL HOLE DETAILS
DRILL HOLEEASTING
(mE)NORTHING
(mN)ELEVATION
(mASL) DIP AZIMUTHDEPTH
(m)
PROMONTORIO
APR-DD-043 9976.7 10324.4 2071.9 -45o 092o 208.4
APR-DD-044 9991.5 10261.7 2074.5 -45o 085o 203.8
APR-DD-045 10028.1 10212.1 2075.9 -45o 090o 200.9
APR-DD-046 9935.3 10219.1 2027.8 -45o 090o 202.5
APR-DD-047 9926.7 10254.2 2028.4 -45o 087o 204.5
APR-DD-048 9905.7 10331.0 2021.6 -45o 088o 250.1
APR-DD-049 9821.9 10121.3 2011.2 -55o 088o 334.2
APR-DD-050 9910.1 10068.3 2004.4 -65o 090o 301.9
APR-DD-051 10001.7 9917.2 2038.7 -75o 088o 249.8
APR-DD-052 9996.6 9917.4 2039.4 -57o 268o 200.5
CASCADA
APR-DD-053 9869.1 10427.2 1999.6 -75o 180o 202.5
APR-DD-054 9868.5 10427.2 1999.6 -45o 210o 185.6
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POZO DE NACHO (Molybdenum)
PozodeNachocontainsasubstantialbodyofmolybdenummineralisationhostedwithinanintrusiveporphyrysystemandsurroundingsediments.Azurehasdrilledmineralisationoveranareaof800mby250m,fromsurfacetodepthsinexcessof300mandthemineralisedsystemremainsopen-endedinmostdirections.AnIPandresistivitysurveyofthepropertywascompletedinlate2010withseveralstronganomaliesidentified.Azureiscontemplatingvariousstrategiestoadvancethispromisingproperty.
ESTACION LLANO (Gold)
This24km²propertycoverstheinterpretedwesternextensionofthemineralisedsystemwhichhoststhe>1.3millionozSanFranciscoGoldMine(currentlyproducingatarateof100,000ozgoldperyear).DrillingbetweenthemineandtheEstacionLlanoboundarybyCanadianowner,TimminsGoldCorp,hasconfirmedthatthemineralisedsystemextendswesttowardsAzure’sproperty.
Azure commenced its explorationwith a programof groundmagnetics and soil sampling.The groundmagnetic survey identified acontinuationof thehighlymagnetic rocksequencethathosts theSanFranciscoMineandthesoil samplingreturnedgoldanomalismcoincidentwiththemagnetichigh.TheseinterpretedextensionsoftheSanFranciscomineralisedsystemwillbethefocusofthenextexplorationstage.
Review of Operations (cont’d)
9
Your directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Azure Minerals Limited and the entities it controlled at the end of or during the year ended 30 June 2011.
DIRECTORS
ThefollowingpersonsweredirectorsofAzureMineralsLimitedduringthewholeofthefinancialyearanduptothedateofthisreport.
Anthony RoviraJohn SaleebaWolf Martinick
PRINCIPAL ACTIVITIES
DuringtheyeartheprincipalcontinuingactivityoftheGroupwasexplorationforpreciousandbasemineralsinMexico.
DIVIDENDS
Nodividendswerepaidordeclaredsincethestartofthefinancialyear.Norecommendationforpaymentofdividendshasbeenmade.
REVIEW OF OPERATIONS
Group Overview
AzureMineralsLimitedwasincorporatedon19September2003.Itsprincipalfocusonexplorationforgold,copper,silverandzincinMexico.Thecompanyhastwelve100%ownedprojects,twoofwhichhavebeenjointventured.Thecompany’sprincipalprojectisthePromontorioprojectwhereamodestsizebuthighgradecopper-gold—silverdeposithasbeenidentified.TheCompanywillcontinuetoseekopportunitieseither100%ownedorinjointventureinMexico.
Operating Results for the Year
Theoperating loss after income taxof thecompany for theyearended30 June2011was$4,461,805 (2010:$2,058,068). Includedin this lossfigure is$3,982,806(2010:$1,536,522)ofexplorationexpenditurewrittenoff.Refer tonotes1(d)and5 to thefinancialstatements.
Shareholder Returns
2011 2010
Basiclosspershare(cents) (1.2) (0.9)
Dilutedlosspershare(cents) (1.2) (0.9)
Investments for Future Performance
Thefutureperformanceofthegroupisdependantuponexplorationsuccessandthecontinuedprogressofdevelopmentofthoseprojectswherepreciousandbasemetalsarealreadypresent.TothisendthegrouphasbudgetedtocontinueexplorationatitsMexicoprojects.
Review of Financial Condition
Theconsolidatedentityhasasoundcapitalstructureandisinanexcellentpositiontoprogressitsmineralproperties.Duringtheyear,$4,341,890(aftercapitalraisingcosts)wasraisedthroughtheissueof50,782,334sharesviaprivateplacements,sharepurchaseplanandanentitlementsissuetoshareholders.
Risk Management
Theboardisresponsibleforensuringthatrisks,andalsoopportunities,areidentifiedonatimelybasisandthatactivitiesarealignedwiththerisksandopportunitiesidentifiedbytheboard.
Thegroupbelievesthatitiscrucialforallboardmemberstobeapartofthisprocess,andassuchtheboardhasnotestablishedaseparateriskmanagementcommittee.TheBoardhasadoptedaRiskManagementPolicy.
Theboardhasanumberofmechanismsinplacetoensurethatmanagement’sobjectivesandactivitiesarealignedwiththerisksidentifiedbytheboard.Theseincludethefollowing:
• Boardapprovalofastrategicplan,whichcoversstrategystatementsdesignedtomeetstakeholders’needsandmanagebusinessrisk.
• Implementationofboardapprovedoperatingplansandbudgetsandboardmonitoringofprogressagainstthesebudgets.
Thecompanyundertakesriskreviewmeetingsasrequiredwiththeinvolvementofseniormanagement.Identifiedrisksareweighedwithactiontakentomitigatekeyrisks.
Directors’ Report
10
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
SignificantchangesinthestateofaffairsoftheGroupduringthefinancialyearwereasfollows:
(a)Anincreaseincontributedequityof$4,341,890(from$35,250,678to$39,592,568)asaresultof:
2011$
Issueof50,782,334fullypaidordinarysharesat$0.09each 4,570,410
Lessexpensesassociatedwiththeaboveissueofshares (228,520)
Total 4,341,890
Netcashreceivedfromtheincreaseincontributedequityamountingto$4,341,890wasraisedprincipallytocontinuethecompany’sexplorationprogrammeinMexico.
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Nomatter or circumstance has arisen since the end of the financial year which significantly affected ormay significantly affect theoperationsofthegroup,theresultsofthoseoperations,orthestateofaffairsofthegroupinfuturefinancialyears.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Thegroupexpectstomaintainthepresentstatusandlevelofoperations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Thecompanyissubjecttosignificantenvironmentalregulationinrespecttoitsexplorationactivities.
Thecompanyaimstoensuretheappropriatestandardofenvironmentalcareisachieved,andindoingso,thatit isawareofandisincompliancewithallenvironmentallegislation.Thedirectorsofthecompanyarenotawareofanybreachofenvironmentallegislationfortheyearunderreview.ThedirectorshaveconsideredcompliancewiththeNationalGreenhouseandEnergyReportingAct2007whichrequiresentitiestoreportannualgreenhousegasemissionsandenergyuse.ThedirectorshaveassessedthattheCompanyhasnocurrentreportingrequirements,butmayberequiredtoreportinthefuture.
INFORMATION ON DIRECTORSNames, qualifications, experience and special responsibilities
Mr. Anthony Paul RoviraBScFlindersUniversity,BSc(Hons)FlindersUniversity,MAusIMM(AppointedExecutiveChairman6June2007)
Experience and Expertise
TonyRovirahas25yearstechnicalandmanagementexperienceintheminingindustry,asanexplorationandmininggeologist,andasacompanyexecutiveatBoardlevel.SincegraduatingfromFlindersUniversityinSouthAustraliain1983,Tonyhasworkedforcompaniesbothlargeandsmall,includingBHP,BarrackMines,PegasusGoldandJubileeMines.
From1997-2003TonywastheGeneralManagerofExplorationwithJubileeMines,duringwhichtimeheledtheteamthatdiscoveredanddevelopedtheworldclassCosmosandCosmosDeepsnickelsulphidedepositsinWesternAustralia.Intheyear2000,theAssociationofMiningandExplorationCompaniesawardedTonythe“ProspectoroftheYearAward”forthesediscoveries.
Tony joinedAzureMinerals as the inaugural CEO inDecember 2003 andwas appointed Executive Chairman in June 2007. He isresponsibleforthedecisiontofocusAzureMinerals’activitiesontheworldclassmineralprovincesinMexico,wherethecompanyhasbeenoperatingsince2005.
Other Current Directorships
None.
Former Directorships in the last 3 years
None.
Special Responsibilities
ChairmanoftheBoardandManagingDirector
Interests in Shares and Options
3,200,000ordinarysharesinAzureMineralsLimited,ofwhich1,880,000areheldindirectly.8,000,000optionsoverordinarysharesinAzureMineralsLimited
director’s report (cont’d)
11
Dr Wolf MartinickPhD,BSc(agric)(Appointed1September2007)
Experience and Expertise
DrMartinickisanenvironmentalscientistwithover40yearsexperienceinmineralexplorationandminingprojectsaroundtheworld,attendingtoenvironmental,water,landaccessandindigenouspeopleissues.Hehasconductedduediligenceonminingprojectsaroundtheworldonbehalfofinternationalfinancialinstitutionsandresourcecompaniesforavarietyoftransactionsincludinglistingsoninternationalstockexchanges,mergersanddebtfinancing.HeisaFellowoftheAustralianInstituteofMiningandMetallurgy.
HeisafoundingdirectorandchairmanofWeatherlyInternationalplc,anAIMlistedcompanywithcopperminesinNamibia.HewasalsoafoundingdirectorofBasinMineralsLimited,anASXlistedmineralexplorationcompanythatdiscoveredaworld-classmineralprojectinVictoria,Australia,thatwasacquiredbyIlukaResourcesLimitedin2003.
Other Current Directorships
SunResourcesNL–Non-ExecutiveDirectorsinceFebruary1996EzenetLimited–ChairmansinceJanuary2003WeatherlyInternationalPlc–DirectorsinceJuly2005
Former Directorships in the last 3 years
WindimurraVanadiumLimited–resigned2October2009CarbineResourcesLimited–resigned4November2008UranLimited–resigned12November2010
Special Responsibilities
ChairmanRemunerationCommitteeMemberofAuditCommittee
Interests in Shares and Options
1,540,000ordinarysharesinAzureMineralsLimited2,900,000optionsoverordinarysharesinAzureMineralsLimited
Mr. John Walter SaleebaBCom,LLB,CPA,FAICD(NonExecutiveDirector,chairmanauditcommittee,remunerationcommitteemember)
Experience and Expertise
MrSaleebawasformerlyapartnerinthelawfirmClaytonUtz.HeisaFellowoftheAustralianInstituteofCompanyDirectorsandiscurrentlyChairmanofResourceEquipmentLimitedandVDMGroupLimited.MrSaleebahashelddirectorshipswithanumberofotherpubliccompanies,coveringawiderangeofbusinessactivities.
Other Current Directorships
ResourceEquipmentLimited–Non-ExecutiveDirectorandChairmansinceFebruary2002.
Former Directorships in the last 3 years
VDMGroupLimited–resigned26November2010.
Special Responsibilities
ChairmanofAuditCommitteeMemberofRemunerationCommittee
Interests in Shares and Options
2,669,600ordinarysharesinAzureMineralsLimited,allofwhichareheldindirectly.2,500,000optionsoverordinarysharesinAzureMineralsLimited
12
Company Secretary
Brett DicksonBBus,CPA(Appointed21November2006)
MrDicksonisaCertifiedPractisingAccountantwithaBachelorsdegreeinEconomicsandFinancefromCurtinUniversityandhasover20yearsexperienceinthefinancialmanagementofcompanies,principallycompaniesinearlystagedevelopmentofitsresourceorproduct,andoffersbroadfinancialmanagementskills.HehasbeenChiefFinancialOfficerforanumberofsuccessfulresourcecompanieslistedontheASX.Inadditionhehashadcloseinvolvementwiththefinancinganddevelopmentofanumberofgreenfieldresourcesprojects.
DIRECTORS’ MEETINGS Thenumberofdirectors’meetingsheld(includingmeetingsofcommitteesofdirectors)andnumberofmeetingsattendedbyeachofthedirectorsofthecompanyduringthefinancialyearare:
A B A B A B
AnthonyPaulRovira 7 7 * * * *
JohnWalterSaleeba 7 7 2 2 1 1
WolfGerhardMartinick 7 7 2 2 1 1
NotesANumberofmeetingsattended.BNumberofmeetingsheldduringthetimethedirectorheldofficeorwasamemberofthecommitteeduringtheyear.*Notamemberoftherelevantcommittee.
Retirement, Election And Continuation In The Office Of DirectorsJohnSaleebaisthedirectorretiringbyrotationwho,andhasadvisedhewillnotbeseekingre-election.
director’s report (cont’d)
Meetings of CommitteesDirectors’ Meetings
RemunerationAudit
13
REMUNERATION REPORT (AUDITED)
Theremunerationreportissetoutunderthefollowingmainheadings:
A Principles used to determine the nature and amount of remunerationB Details of remunerationC Service agreementsD Share-based compensationE Additional Information
Theinformationprovidedinthisremunerationreporthasbeenauditedasrequiredbysection308(3C)oftheCorporationAct2001.
A Principles used to determine the nature and amount of remuneration
TheremunerationpolicyofAzureMineralsLimitedhasbeendesignedtoaligndirectorandexecutiveobjectiveswithshareholderandbusinessobjectivesbyprovidingafixedremunerationcomponentandwhereappropriateofferingspecificlongtermincentivesbasedonkeyperformanceareasaffectingtheGroupsresults.AtpresenttheCompanyhasnotimplementedanyspecificlong-termincentivesandassuchtheremunerationpolicyisnotimpactedbytheGroupsperformance,includingearningsinshareholderwealth(dividends,changesinsharepriceorreturnoncapitaltoshareholders).TheboardofAzureMineralsLimitedbelievestheremunerationpolicytobeappropriateandeffectiveinitsabilitytoattractandretainthebestexecutivesanddirectorstorunandmanagetheGroup.
Theremunerationpolicy,settingthetermsandconditionsfortheexecutivedirectorsandotherseniorexecutives,wasdevelopedbytheboard.Allexecutivesreceiveabasesalary(whichisbasedonfactorssuchaslengthofserviceandexperience)andsuperannuation.TheboardreviewsexecutivepackagesannuallybyreferencetotheGroupsperformance,executiveperformanceandcomparableinformationfromindustrysectorsandotherlistedcompaniesinsimilarindustries.
Theboardmayexercisediscretioninrelationtoapprovingincentives,bonusesandoptions.Thepolicyisdesignedtoattractthehighestcalibreofexecutivesandrewardthemforperformancethatresultsinlongtermgrowthinshareholderwealth.
Executivesarealsoentitledtoparticipateintheemployeeshareandoptionarrangements.
Theexecutivedirectorsandexecutivesreceiveasuperannuationguaranteecontributionrequiredbythegovernment,whichiscurrently9%ofcashsalary,anddonotreceiveanyotherretirementbenefits.Someindividuals,however,maychoosetosacrificepartoftheirsalarytoincreasepaymentstowardssuperannuation.
Allremunerationpaidtodirectorsandexecutives isvaluedatthecosttothecompanyandexpensed.Sharesgiventodirectorsandexecutivesarevaluedasthedifferencebetweenthemarketpriceofthosesharesandtheamountpaidbythedirectororexecutive;todatenoshareshavebeenawardedtodirectorsorexecutives.OptionsarevaluedusingeithertheBlackScholesorBinomialmethodologies.
The board policy is to remunerate non executive directors at market rates for comparable companies for time, commitment andresponsibilities.Theboarddeterminespaymentstothenonexecutivedirectorsandreviewstheirremunerationannuallybasedonmarketpractice,dutiesandaccountability.Independentexternaladviceissoughtwhenrequired.ThemaximumaggregateamountoffeesthatcanbepaidtononexecutivedirectorsissubjecttoapprovalbyshareholdersattheAnnualGeneralMeeting(currently$200,000).Feesfornonexecutivedirectorsarenotlinkedtotheperformanceoftheeconomicentity.However,toaligndirectors’interestswithshareholderinterests,thedirectorsareencouragedtoholdsharesinthecompanyandareabletoparticipateinemployeeoptionplans.
Inthe2005/2006financialyearAzureMineralsLimitedestablishedaDirectorsRetirementBenefitPolicywherebyeachnon-executivedirectorisentitledtoaretirementbenefitinaccordancewiththemaximumamountascertainedpursuanttosection200G(2)(b)oftheCorporationsAct2001.Inthe2006/2007financialyeartheDirectorsRetirementBenefitPolicywasterminatedandtheretirementbenefitentitlementhasbeenfrozenasof30June2006.
B Details of remuneration
Amount of remuneration
Detailsoftheremunerationofthedirectorsandkeymanagementpersonnel(asdefinedinAASB124RelatedPartyDisclosures)ofAzureMineralsLimitedaresetoutbelowinthefollowingtables.
ThekeymanagementpersonnelofAzureMineralsLimitedincludesthedirectorsasdisclosedearlierinthisreportandthefollowingwhohaveauthorityandresponsibilityforplanning,directingandcontrollingtheexplorationactivitiesoftheentityandtheCompanySecretary,MrBDicksonisanexecutivewhoseremunerationmustbedisclosedundertheCorporationsAct2001.
14
Key management personnel of the Group
Share-based
Payments
Name
Cash, salary &
feesCashBonus
Non monetary benefits
Super-annuation
Retirement benefits Options
Total
PercentageConsisting of Options
%
Directors
AnthonyPaulRovira–ExecutiveChairman
2011 300,000 - - 27,000 - 109,260 436,260 25.0
2010 258,500 - - 23,265 - 144,500 426,265 33.9
JohnWalterSaleeba–Nonexecutive
2011 45,000 - - 4,050 - 27,315 76,365 35.8
2010 32,500 - - 2,925 - 57,800 93,225 62.0
WolfGerhardMartinick–NonExecutive
2011 45,000 - - 4,050 - 27,315 76,365 35.8
2010 24,375 - - 11,050 - 57,800 93,225 62.0
Executives
BrettDickson–CompanySecretary
2011 153,120 - - - - 81,945 235,065 34.9
2010 132,000 - - - - 101,150 233,150 43.4
Total
2011 543,120 - - 35,100 - 245,835 824,055 29.8
2010 447,375 - - 37,240 - 361,250 845,865 42.7
director’s report (cont’d)
Post EmploymentShort-Term
15
Compensation options
Duringthe2011and2010thefollowingoptionswereissued.
2011/2010 Number DateFair ValuePer option
Fair value$
Exercise Price
$Expiry date
First exercise
date
Last exercise
date Number
Directors
APRovira20112010
2,000,0005,000,000
14 Dec 109Dec09
.0546
.0289109,260144,500
0.1300.088
30 Nov 1330Nov12
14 Dec 109Dec09
30 Nov 1330Nov12
2,000,0005,000,000
JWSaleeba20112010
500,0002,000,000
14 Dec 109Dec09
.0546
.028927,31557,800
0.1300.088
30 Nov 1330Nov12
14 Dec 109Dec09
30 Nov 1330Nov12
500,0002,000,000
WMartinick20112010
500,0002,000,000
14 Dec 109Dec09
.0546
.028927,31557,800
0.1300.088
30 Nov 1330Nov12
14 Dec 109Dec09
30 Nov 1330Nov12
500,0002,000,000
Executives
BDickson20112010
1,500,0003,500,000
14 Dec 109Dec09
.0546
.028981,945101,150
0.1300.088
30 Nov 1330Nov12
14 Dec 109Dec09
30 Nov 1330Nov12
1,500,0003,500,000
Total20112010
4,500,00012,500,000
0.546.0289
245,835361,250
4,500,00012,500,000
ValueofOptionsgrantedaspartofremunerationwascalculatedinaccordancewithAASB2:ShareBasedPayments.
Fair Value per options granted during the year
$
Value of options granted during the
year$
Value of options exercised during
the year$
Value of options lapsed during the
year$
Remuneration consisting of
options for the year%
Directors
APRovira20112010
0.0550.029
109,260144,500
--
--
25.033.9
JWSaleeba20112010
0.0550.029
27,31557,800
--
--
35.862.0
WGMartinick20112010
0.0550.029
27,31557,800
--
(16,400)(16,400)
35.862.0
Executives
BDickson20112010
0.0550.029
81,945101,150
--
-(182,760)
34.943.4
Therewerenoalterationstothetermsandconditionsofoptionsgrantedasremunerationsincetheirgrantdate.TherewereneitherforfeituresnorsharesissuedonexerciseofCompensationOptionsduring2011or2010.
TheCompany’sremunerationpolicyprohibitsdirectorsandexecutivesfromenteringintotransactionsorarrangementswhichlimittheeconomicriskofparticipatinginunvestedentitlements.
Retirementbenefitsprovidedforthenon-executivedirectorsinthefinancialstatementsdonotformpartoftheaboveremunerationuntilsuchtimeastheamountispaidtotheretiringdirector.
Apart fromthe issueofoptions thecompanycurrentlyhasnoperformancebased remunerationcomponentbuilt intodirectorandexecutiveremuneration(2010:Nil)
Terms and conditions for each grantGranted
16
C Service Agreements
Remunerationandothertermsofemploymentforthefollowingkeymanagementpersonnelareformalisedinserviceagreements,thetermsofwhicharesetoutbelow:
Anthony Rovira, Managing Director:
• Termofagreement-1yearscommencing1July2011.• Basesalary,exclusiveofsuperannuation,of$300,000tobereviewedannuallybytheremunerationcommittee.• Paymentofterminationbenefitonearlyterminationbytheemployer,otherthanforgrossmisconduct,includesanamountequal
totheamountsdueforthebalanceofthetermofthecontractfromthedateoftermination.
Brett Dickson, Company Secretary/Chief Financial Officer:
• Termofagreement–1yearscommencing1July2011• Fixedfee,$12,760permonth.• Paymentofterminationbenefitonearlyterminationbytheemployer,otherthanforgrossmisconduct,includesanamountequal
totheamountsdueforthebalanceofthetermofthecontractfromthedateoftermination.
Retirement Benefits
Otherretirementbenefitsmaybeprovideddirectlybythecompanyifapprovedbyshareholders.
D Share based compensation
OptionsoversharesinAzureMineralsLimitedmaybeissuedtodirectorsandexecutives.Theoptionsarenotissuedbasedonperformancecriteria,butareissuedtodirectorsandexecutivesofAzureMineralsLimited;whereappropriate,toincreasegoalcongruencebetweenexecutives,directorsandshareholders.Therearenostandardvestingconditionstooptionsawardedwithvestingconditions,ifany,atthediscretionofDirectorsatthetimeofgrant.Optionsaregrantedfornilconsideration.
During the year 4,500,000 options exercisable at $0.13 on or before November 2013 were issued to Directors and Executives.(2010:12,500,000exercisableat$0.088onorbefore30November2012)
Nooptionswereexercisedduringthefinancialyearandnooptionshavebeenexercisedsincetheendofthefinancialyear.Duringtheyear900,000(2010:7,250,000)optionsexercisableatvariouspriceswithvariousexpirydateslapsed.Thevalueoftheoptionsatlapsedatewasnilastheexercisepriceoftheoptionwassignificantlyinexcessofthemarketpriceoftheunderlyingshare.Thevalueisdeterminedatthetimeoflapsing,butassumingtheconditionwassatisfied.
TheCompany’sremunerationpolicyprohibitsexecutivesfromenteringintotransactionsorarrangementswhichlimitthe“atrisk”aspectofparticipatinginunvestedentitlements.
E Additional Information
Performancebasedremuneration
Detailsofremuneration:options
Thecompanycurrentlyhasnoperformancebasedremunerationcomponentbuiltintodirectorandexecutiveremunerationpackages.
PerformanceIncomeasaproportionoftotalcompensation
Noperformancebasedbonuseshavebeenpaidtokeymanagementpersonnelduringthefinancialyear.Itistheintentoftheboardtoreviewtheinclusionofperformancebonusesaspartofremunerationpackagesduringthe2011/12financialyear.
- End of Audited Remuneration Report -
director’s report (cont’d)
17
LOANS TO DIRECTORS AND EXECUTIVES
Noloanshavebeenprovidedtodirectorsorexecutives.
SHARES UNDER OPTION
Atthedateofthisreportthereare18,400,000unissuedordinarysharesinrespectofwhichoptionsareoutstanding.
Total Number of options
Balanceatthebeginningoftheyear 14,800,000
ShareoptionmovementsduringtheyearIssuedLapsed
Exercisableat13.0cents,onorbefore30November20134,500,000 4,500,000
Exercisableat17.5cents,onorbefore30November2011(500,000) (500,000)
Exercisableat25cents,onorbefore31January2011(400,000) (400,000)
Total options issued and lapsed in the year to 30 June 2011 3,600,000
Total number of options outstanding as at 30 June 2011 and at the date of this report 18,400,000
Thebalanceiscomprisedofthefollowing
Date granted Expiry dateExercise price
(cents)Number of
options
6Dec2006 31Jan2012 25.0 500,000
6Dec2006 31Jan2013 35.0 500,000
24Dec2007 30Jan2012 25.0 400,000
9Dec2009 30Nov2012 8.8 12,500,000
14Dec2010 30Nov2013 13.0 4,500,000
Total number of options outstanding at the date of this report 18,400,000
Nopersonentitledtoexerciseanyoptionreferredtoabovehasorhad,byvirtueoftheoption,arighttoparticipateinanyshareissueofanyotherbodycorporate.
Nooptionswereexercisedduringthefinancialyearandsincetheendofthefinancialyearnooptionshavebeenexercised.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Duringthefinancialyear,AzureMineralsLimitedpaidapremiumof$19,092(2010:$19,092)toensurethedirectorsandsecretaryofthecompanyanditsAustralianbasedcontrolledentities.
TheliabilitiesinsuredandlegalcoststhatmaybeincurredindefendingcivilorcriminalproceedingsthatmaybebroughtagainsttheofficersintheircapacityasofficersofentitiesintheGroup,andanyotherpaymentsarisingfromliabilitiesincurredbytheofficersinconnectionwithsuchproceedings.Thisdoesnotincludesuchliabilitiesthatarisefromconductinvolvingawilfulbreachofdutybytheofficersortheimproperusebytheofficersoftheirpositionorofinformationtogainadvantageforthemselvesorsomeoneelseortocausedetrimenttothecompany. It isnotpossibletoapportionthepremiumbetweenamountsrelatingtotheinsuranceagainst legalcostsandthoserelatingtootherliabilities.
Proceedings on behalf of the company
NopersonhasappliedtotheCourtundersection237oftheCorporationsAct2001forleavetobringproceedingsonbehalfofthecompany,ortointerveneinanyproceedingstowhichthecompanyisaparty,forthepurposeoftakingresponsibilityonbehalfofthecompanyforallorpartofthoseproceedings.
No Proceedings have been brought or intervened in on behalf of the companywith leave of theCourt under section 237of theCorporationsAct2001
18
NON AUDIT SERVICES
TheCompanymaydecidetoemploytheauditoronassignmentsadditionaltotheirstatutoryauditdutieswheretheauditor’sexpertiseandexperiencewiththecompanyand/ortheGroupareimportant.
Detailsoftheamountpaidorpayabletotheauditor(BDOAudit(WA)PtyLtd)forauditandnon-auditservicesprovidedduringtheyeararesetoutbelow.
TheBoardofdirectorshasconsideredthepositionand,inaccordancewithadvicereceivedfromtheauditcommittee,issatisfiedthattheprovisionsofthenon-auditservicesiscompatiblewiththegeneralstandardofindependenceforauditorsimposedbytheCorporationsAct2001.Thedirectorsaresatisfiedthattheprovisionofnon-auditservicesbytheauditor,assetoutbelow,didnotcompromisetheauditorindependencerequirementsoftheCorporationsAct2001forthefollowingreasons:
• Allnon-auditserviceshavebeenreviewedbytheauditcommitteetoensuretheydonotimpacttheimpartialityandobjectivityoftheauditor
• NoneoftheservicesunderlinethegeneralprincipalsrelatingtoauditorindependenceassetoutinAPES110CodeofEthicsforProfessionalAccountants.
Duringtheyearthefollowingfeeswerepaidorpayableforservicesprovidedbytheauditoroftheparententity,itsrelatedpracticesandnon-auditfirms:
2011$
2010$
1. Audit Services
BDOAudit(WA)PtyLtd
Auditandreviewoffinancialreports 35,435 37,018
2. Non audit Services
Audit-relatedservices
BDOAudit(WA)PtyLtd
AttendanceatAnnualGeneralMeeting 325 542
Taxation Services
BDOAudit(WA)PtyLtd
Taxcomplianceservices 8,989 11,110
Totalremunerationfornon-auditservices 9,314 11,652
AUDITOR INDEPENDENCE
Acopyoftheauditor’sindependencedeclarationasrequiredundersection307coftheCorporationsAct2001issetoutonpage59.
AUDITOR
BDOAudit(WA)PtyLtdcontinuesinofficeinaccordancewithsection327oftheCorporationsAct2001.
Thisreportismadeinaccordancewitharesolutionofthedirectors.
Anthony Paul Rovira ExecutiveChairmanPerth,23September2011
director’s report (cont’d)
Consolidated
Azure Minerals Limited – 2011 Annual Report
18
Directors' ReportProceedings on behalf of the companyNo person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of thecompany for all or part of those proceedings.
No Proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001
NON-AUDIT SERVICESThe Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the Group are important.Details of the amount paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for audit and non-audit services provided during the year are set out below.The Board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provisions of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:• All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of
the auditor• None of the services underline the general principals relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-audit firms:
Consolidated
1. Audit Services
2011
$
2010
$
BDO Audit (WA) Pty Ltd 35,435 37,018Audit and review of financial reports
2. Non audit ServicesAudit-related servicesBDO Audit (WA) Pty Ltd
Attendance at Annual General Meeting 325 542
Taxation ServicesBDO Audit (WA) Pty Ltd
Tax compliance services
8,989 11,110Total remuneration for non-audit services 9,314 11,652
AUDITOR INDEPENDENCE A copy of the auditor’s independence declaration as required under section 307c of the Corporations Act 2001 is set out on page 53. 11,652
AUDITORBDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the directors.
Anthony Paul Rovira Executive ChairmanPerth, 23 September 2011
19
Approach to Corporate Governance
AzureMineralsLimited(Company)hasadoptedsystemsofcontrolandaccountabilityasthebasisfortheadministrationofcorporategovernance. Some of these policies and procedures are summarised in this statement. Commensuratewith the spirit of theASXCorporateGovernanceCouncil'sCorporateGovernancePrinciplesandRecommendations2ndedition(Principles&Recommendations),theCompanyhasfollowedeachrecommendationwheretheBoardhasconsideredtherecommendationtobeanappropriatebenchmarkforitscorporategovernancepractices.WheretheCompany'scorporategovernancepracticesfollowarecommendation,theBoardhasmadeappropriatestatementsreportingontheadoptionoftherecommendation. Incompliancewiththe"ifnot,whynot"reportingregime,where,afterdueconsideration,theCompany'scorporategovernancepracticesdepartfromarecommendation,theBoardhasofferedfulldisclosureandanexplanationfortheadoptionofitsownpractice.
FurtherinformationabouttheCompany'scorporategovernancepracticesmaybefoundontheCompany'swebsiteatwww.azureminerals.com.au,underthesectionmarked"Corporate-CorporateGovernance".
TheCompanyreportsbelowonhowithasfollowed(orotherwisedepartedfrom)eachofthePrinciples&Recommendationsduringthe2010/2011financialyear(ReportingPeriod).ThePrinciples&Recommendationswereamendedin2010,andtheseamendmentsapply to theCompany's first financial year commencingonor after 1 January2011. Accordingly, disclosure against thePrinciples&Recommendationsasamendedin2010willbemadeinrelationtotheCompany'sfinancialyearending30June2012.ThereportbelowismadeagainstthePrinciples&Recommendationspriortotheiramendmentin2010.
However,theCompanyhasmadeapartialearlytransitiontotheamendedPrinciples&RecommendationsbyadoptingaDiversityPolicyinaccordancewiththenewRecommendation3.2.
Board
Roles and responsibilities of the Board and Senior Executives(Recommendations: 1.1, 1.3)
TheCompanyhasestablished the functions reserved to theBoard, and thosedelegated to seniorexecutives andhas setout thesefunctionsinitsBoardCharter.
TheBoardiscollectivelyresponsibleforpromotingthesuccessoftheCompanythroughitskeyfunctionsofoverseeingthemanagementoftheCompany,providingoverallcorporategovernanceoftheCompany,monitoringthefinancialperformanceoftheCompany,engagingappropriatemanagementcommensuratewiththeCompany'sstructureandobjectives, involvement inthedevelopmentofcorporatestrategyandperformanceobjectives,andreviewing,ratifyingandmonitoringsystemsofriskmanagementandinternalcontrol,codesofconductandlegalcompliance.
SeniorexecutivesareresponsibleforsupportingtheExecutiveChairandassistingtheExecutiveChairinimplementingtherunningofthegeneraloperationsandfinancialbusinessoftheCompany,inaccordancewiththedelegatedauthorityoftheBoard.SeniorexecutivesareresponsibleforreportingallmatterswhichfallwithintheCompany'smaterialitythresholdsatfirstinstancetotheExecutiveChairor,ifthematterconcernstheExecutiveChair,directlytotheChairortheleadindependentdirector,asappropriate.
TheCompany'sBoardCharterisavailableontheCompany'swebsite.
Skills, experience, expertise and period of office of each Director(Recommendation: 2.6)
AprofileofeachDirectorsettingouttheirskills,experience,expertiseandperiodofofficeissetoutintheDirectors'Report.
Director independence(Recommendations: 2.1, 2.2, 2.3, 2.6)
TheBoardhasamajorityofdirectorswhoareindependent.
The independentdirectorsoftheCompanyareWolfMartinickand JohnSaleeba. Thesedirectorsare independentastheyarenon-executivedirectorswhoarenotmembersofmanagementandwhoarefreeofanybusinessorotherrelationshipthatcouldmateriallyinterferewith,orcouldreasonablybeperceivedtomateriallyinterferewith,theindependentexerciseoftheirjudgment.
TheBoardconsiderstheindependenceofdirectorshavingregardtotherelationshipslistedinBox2.1ofthePrinciples&RecommendationsandtheCompany'smaterialitythresholds.TheBoardhasagreedon,andsetoutintheCompany’sBoardCharter,thefollowingguidelinesforassessingthematerialityofmatters:
• Balancesheetitemsarematerialiftheyhaveavalueofmorethan5%ofpro-formanetasset.• Profitandlossitemsarematerialiftheywillhaveanimpactonthecurrentyearoperatingresultof5%ormore.• ItemsarealsomaterialiftheyimpactonthereputationoftheCompany,involveabreachoflegislation,areoutsidetheordinary
courseofbusiness,couldaffecttheCompany’srightstoitsassets,ifaccumulatedwouldtriggerthequantitativetests,involvea
CORPORATE GOVERNANCE STATEMENT
20
contingentliabilitythatwouldhaveaprobableeffectof5%ormoreonbalancesheetorprofitandlossitems,orwillhaveaneffectonoperationswhichislikelytoresultinanincreaseordecreaseinnetincomeordividenddistributionofmorethan5%.
• Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerousprovisionsintheopinionoftheBoard,impactonincomeordistributioninexcessofthequantitativetests,thereisalikelihoodthateitherpartywilldefault,andthedefaultmaytriggeranyofthequantitativeorqualitativetests,areessentialtotheactivitiesoftheCompanyandcannotbereplaced,orcannotbereplacedwithoutanincreaseincostwhichtriggersanyofthequantitativetests,containortriggerchangeofcontrolprovisions,arebetweenorforthebenefitofrelatedparties,orotherwisetriggerthequantitativetests.
Thenon-independentExecutiveChairoftheBoardisAnthonyRovira.AnthonyRoviraisnotindependentbyvirtueofhisexecutiverole.WhiletheBoardrecognisestheimportanceoftheneedforthedivisionofresponsibilitiesbetweentheChairandManagingDirector,theBoardconsidersthatAnthonyRoviraisthemostappropriatepersonforthepositionofExecutiveChairgivenhisindustryexperience,andthesizeandcurrentactivitiesoftheCompany.TheBoardalsobelievesthatAntonyRovira’sappointmentasChair is inlinewithshareholderexpectation.
Independent professional advice(Recommendation: 2.6)
Toassistdirectorswithindependentjudgement, it istheBoard'spolicythatifadirectorconsidersitnecessarytoobtainindependentprofessionaladvicetoproperlydischargetheresponsibilityoftheirofficeasadirectorthen,providedthedirectorfirstobtainsapprovalfromtheChairforincurringsuchexpense,theCompanywillpaythereasonableexpensesassociatedwithobtainingsuchadvice.
Selection and (Re)Appointment of Directors(Recommendation: 2.6)
IndeterminingcandidatesfortheBoard,theNominationCommittee(orequivalent)followsaprescribedprocesswherebyitevaluatesthemixofskills,experience,expertiseanddiversityoftheexistingBoard.Inparticular,theNominationCommittee(orequivalent)istoidentifytheparticularskillsthatwillbestincreasetheBoard'seffectiveness.Considerationisalsogiventothebalanceofindependentdirectors.Potentialcandidatesareidentifiedand,ifrelevant,theNominationCommittee(orequivalent)recommendsanappropriatecandidateforappointmenttotheBoard.AnyappointmentmadebytheBoardissubjecttoratificationbyshareholdersatthenextgeneralmeeting.
TheBoardrecognisesthatBoardrenewaliscriticaltoperformanceandtheimpactofBoardtenureonsuccessionplanning.Eachdirectorother than theManagingDirector,mustnotholdoffice (without re-election)past the thirdannual generalmeetingof theCompanyfollowing the director's appointment or three years following that director's last election or appointment (whichever is the longer).However,adirectorappointedtofillacasualvacancyorasanadditiontotheBoardmustnotholdoffice(withoutre-election)pastthenextannualgeneralmeetingoftheCompany.Ateachannualgeneralmeetingaminimumofonedirectororonethirdofthetotalnumberofdirectorsmustresign.Adirectorwhoretiresatanannualgeneralmeetingiseligibleforre-electionatthatmeeting.Re-appointmentofdirectorsisnotautomatic.
TheCompany'sPolicyandProcedurefortheSelectionand(Re)AppointmentofDirectorsisavailableontheCompany'swebsite.
Board committees
Nomination Committee(Recommendations: 2.4, 2.6)
ThecompositionoftheBoarddoesnotmaketheestablishmentofaseparateNominationCommitteepracticable,andtheBoardbelievesthattherewouldbenoefficienciesorotherbenefitsgainedbyestablishingaseparateNominationCommittee.Accordingly,theBoardperformstheroleoftheNominationCommittee.ItemsthatareusuallyrequiredtobediscussedbyaNominationCommitteearemarkedasseparateagendaitemsatBoardmeetingswhenrequired.WhentheBoardconvenesastheNominationCommitteeitcarriesoutthosefunctionswhicharedelegatedtoitintheCompany’sNominationCommitteeCharter.TheBoarddealswithanyconflictsofinterestthatmayoccurwhenconveninginthecapacityoftheNominationCommitteebyensuringthatthedirectorwithconflictinginterestsisnotpartytotherelevantdiscussions.
ThefullBoarddidnotofficiallyconveneasaNominationCommitteeduringtheReportingPeriod,howevernomination-relateddiscussionsoccurredfromtimetotimeduringtheyearasrequired.
ToassisttheBoardtofulfilitsfunctionastheNominationCommittee,ithasadoptedaNominationCommitteeCharterwhichdescribestherole,composition,functionsandresponsibilitiesoftheNominationCommittee.AcopyoftheNominationCommitteeCharterisavailableontheCompany'swebsite.
CORPORATE GOVERNANCE STATEMENT (cont’d)
21
Audit Committee(Recommendations: 4.1, 4.2, 4.3, 4.4)
TheBoardhasestablishedanAuditCommitteecomprisedofWolfMartinickandJohnSaleeba,bothofwhomare independentnon-executivedirectors.TheAuditCommitteeischairedbyJohnSaleeba.GiventhesizeandstructureoftheBoard,theCompanyisunabletostructuretheAuditCommitteeinaccordancewithRecommendation4.2.However,theAuditCommitteehasbeenstructuredsothatitisinaccordancewithRecommendation4.2,exceptthatitonlyhastwomembers.
TheBoardhasadoptedanAuditCommitteeCharterwhichdescribestherole,composition,functionsandresponsibilitiesoftheAuditCommittee.
TheAuditCommitteeheldtwomeetingsduringtheReportingPeriod.Detailsofthedirectors’attendanceatAuditCommitteemeetingsaresetoutintheDirectors’Report.
Detailsofeachofthedirector’squalificationsaresetout intheDirectors’Report. BothmembersoftheAuditCommitteeconsiderthemselvestobefinanciallyliterateandhaveindustryknowledge.Further,JohnSaleebahasaBachelorofCommerceandisaCertifiedPracticingAccountant.MrSaleeba’squalificationsbringthenecessaryfinancialexpertisetotheAuditCommittee.
TheCompanyhasestablishedproceduresfortheselection,appointmentandrotationofitsexternalauditor.TheBoardisresponsiblefortheinitialappointmentoftheexternalauditorandtheappointmentofanewexternalauditorwhenanyvacancyarises,asrecommendedbytheAuditCommittee(oritsequivalent).CandidatesforthepositionofexternalauditormustdemonstratecompleteindependencefromtheCompanythroughtheengagementperiod.TheBoardmayotherwiseselectanexternalauditorbasedoncriteriarelevanttotheCompany’sbusinessandcircumstances.TheperformanceoftheexternalauditorisreviewedonanannualbasisbytheAuditCommittee(oritsequivalent)andanyrecommendationsaremadetotheBoard.
TheCompany’sAuditCommitteeCharterandtheCompany’sProcedureforSelection,AppointmentandRotationofExternalAuditorareavailableontheCompany’swebsite.
Remuneration Committee(Recommendations: 8.1, 8.2, 8.3)
TheBoardhasestablishedaRemunerationCommitteecomprisingWolfMartinick(Chair)andJohnSaleeba.
TheRemunerationCommitteeheldonemeetingduringtheReportingPeriod.Detailsofthedirectors’attendanceattheRemunerationCommitteemeetingaresetoutintheDirectors’Report.
TheBoardhasadoptedaRemunerationCommitteeCharterwhichdescribestherole,composition,functionsandresponsibilitiesoftheRemunerationCommittee.
Detailsofremuneration,includingtheCompany’spolicyonremuneration,arecontainedintheУRemunerationReportУwhichformsofpartoftheDirectors’Report.TheCompany’spolicyistoremuneratenon-executivedirectorsatafixedfeefortime,commitmentandresponsibilities.Remunerationfornon-executivedirectorsisnotlinkedtoindividualperformance.FromtimetotimetheCompanymaygrantoptionstonon-executivedirectors.Thegrantofoptionsisdesignedtorecogniseandrewardeffortsaswellastoprovidenon-executivedirectorswithadditionalincentivetocontinuethoseeffortsforthebenefitoftheCompany.Themaximumaggregateamountoffees(includingsuperannuationpayments)thatcanbepaidtonon-executivedirectorsissubjecttoapprovalbyshareholdersatgeneralmeeting.
Executivepayandrewardconsistsofabasesalaryandperformanceincentives.LongtermperformanceincentivesmayincludeoptionsgrantedatthediscretionoftheRemunerationCommitteeandsubjecttoobtainingtherelevantapprovals.Thegrantofoptionsisdesignedtorecogniseandrewardeffortsaswellastoprovideadditionalincentiveandmaybesubjecttothesuccessfulcompletionofperformancehurdles.
Inthe2005/2006financialyeartheCompanyestablishedaDirectorsRetirementBenefitPolicywherebyeachnon-executivedirectorisentitledtoaretirementbenefitinaccordancewiththemaximumamountascertainedpursuanttosection200G(2)(b)oftheCorporationsAct2001(Cth). In the2006/2007financialyear, theDirectorsRetirementBenefitPolicywas terminatedandtheretirementbenefitentitlementdoesnotapplytoanynon-executivedirectorappointedfrom30June2006.However,itdoesapplytoJohnSaleeba
TheCompany’sRemunerationCommitteeCharterincludesastatementoftheCompany’spolicyonprohibitingtransactionsinassociatedproductswhichlimittheriskofparticipatinginunvestedentitlementsunderanyequitybasedremunerationschemes.
TheCompany’sRemunerationCommitteeCharterisavailableontheCompany’swebsite.
22
Performance evaluation
Senior executives(Recommendations: 1.2, 1.3)
TheExecutiveChairisresponsibleforevaluatingtheperformanceofseniorexecutives.Theevaluationsareperformedbyconductinginterviewswiththeseniorexecutivesasrequired.Duringtheinterviewkeyperformanceindicatorsaresetandagreedon,whichwillformthebasisforthefollowingyears’review.
TheNominationCommittee(orequivalent),atleastannually,evaluatestheperformanceoftheExecutiveChairbyformalinterview.InreviewingtheperformanceoftheExecutiveChair,performanceagainstpre-determinedbudgetsandperformancecriteriasetthepreviousyear(ifany)isassessed.
DuringtheReportingPeriodanevaluationofseniorexecutivestookplaceinaccordancewiththeprocessdisclosedabove.
Board, its committees and individual directors(Recommendations: 2.5, 2.6)
TheChairisresponsibleforevaluationoftheBoardand,whendeemedappropriate,Boardcommitteesandindividualdirectors.
TheChairevaluatestheBoardand,whendeemedappropriate,Boardcommitteesandindividualdirectorsbyutilisingquestionnaireswhicharecompletedbyeachdirector.TheChair,inconsultationwiththeCompanySecretary,thenreviewsthequestionnairesandholdsroundtablediscussionswiththeBoardtodiscussthequestionnaires.TheChairholdsdiscussionswithindividualdirectors,ifrequired.
DuringtheReportingPeriodanevaluationoftheBoardtookplaceinaccordancewiththeprocessdisclosedabove.AnevaluationofindividualdirectorsdidnottakeplaceduringtheReportingPeriod.
Ethical and responsible decision making
Code of Conduct(Recommendations: 3.1, 3.3)
TheCompanyhasestablishedaCodeofConductastothepracticesnecessarytomaintainconfidenceintheCompany’sintegrity,thepracticesnecessarytotakeintoaccountitslegalobligationsandthereasonableexpectationsofitsstakeholders,andtheresponsibilityandaccountabilityofindividualsforreportingandinvestigatingreportsofunethicalpractices.
AsummaryoftheCompany’sCodeofConductisavailableontheCompanywebsite.
Policy for Trading in Company Securities(Recommendations: 3.2, 3.3)
TheCompanyhasestablishedaPolicyforTradinginCompanySecuritiesbydirectors,officersandemployees,andtheirconnectedpersons(whichincludesspousesandcontrolledentities).
AcopyoftheCompany’sPolicyforTradinginCompanySecuritiesisavailableontheCompany’swebsite.
Continuous Disclosure(Recommendations: 5.1, 5.2)
TheCompanyhasestablishedwrittenpoliciesandproceduresdesignedtoensurecompliancewithASXListingRuledisclosurerequirementsandaccountabilityataseniorexecutivelevelforthatcompliance.
SummariesoftheCompany’sPolicyonContinuousDisclosureandofComplianceProceduresareavailableontheCompany’swebsite.
Shareholder Communication(Recommendations: 6.1, 6.2)
The Company has designed a communications policy for promoting effective communication with shareholders and encouragingshareholderparticipationatgeneralmeetings.
AcopyoftheCompany’sShareholderCommunicationPolicyisavailableontheCompany’swebsite.
Risk ManagementRecommendations: 7.1, 7.2, 7.3, 7.4)
TheBoardhasadoptedaRiskManagementPolicyandRiskManagementProcedures. UndertheRiskManagementPolicy, theBoardoverseestheprocessesbywhichrisksaremanaged.ThisincludesdefiningtheCompany’sriskappetite,monitoringofriskperformanceandthoserisksthatmayhaveamaterialimpacttothebusiness.ManagementisresponsiblefortheimplementationoftheriskmanagementandinternalcontrolsystemtomanagetheCompany’srisksandtoreporttotheBoardwhetherthoserisksarebeingeffectivelymanaged.
CORPORATE GOVERNANCE STATEMENT (cont’d)
23
Inaddition,thefollowingriskmanagementmeasureshavebeenadoptedbytheBoardtomanagetheCompany’smaterialbusinessrisks:
• theBoardhasestablishedauthoritylimitsformanagement,which,ifproposedtobeexceeded,requirespriorBoardapproval;• the Board has adopted a compliance procedure for the purpose of ensuring compliancewith theCompany’s continuous
disclosureobligations;and• theBoardhasadoptedacorporategovernancemanualwhichcontainsotherpoliciestoassisttheCompanytoestablishand
maintainitsgovernancepractices.
TheCompany’ssystemtomanageitsmaterialbusinessrisksincludesthepreparationofariskregisterbymanagementtoidentifytheCompany’smaterialbusinessrisks,analysethoserisks,evaluatethoserisks(includingassigningariskownertoeachrisk)andtreatthoserisks.Risksandtheirmanagementaretobemonitoredandreviewedatleasthalfyearlybyseniormanagement.TheriskregisteristobeupdatedandareportsubmittedtotheExecutiveChair.TheExecutiveChairistoprovideariskreportatleasthalfyearlytotheBoardandanannualreviewoftheriskprofileistobeundertakentoensurerelevancy.Specificareasofriskthatwereidentifiedinthereportincludedoperationalactivities,assetmanagement(includingtitletoexplorationandminingleases)andstaff.
TheBoardhasrequiredmanagementtodesign,implementandmaintainriskmanagementandinternalcontrolsystemstomanagetheCompany’smaterialbusinessrisks.TheBoardalsorequiresmanagementtoreporttoitconfirmingthatthoserisksarebeingmanagedeffectively. TheBoardhasreceivedareport frommanagementas totheeffectivenessof theCompany’smanagementof itsmaterialbusinessrisksfortheReportingPeriod.
TheExecutiveChairandtheChiefFinancialOfficerhaveprovidedadeclarationtotheBoardinaccordancewithsection295AoftheCorporationsActandhaveassuredtheBoardthatsuchdeclarationisfoundedonasoundsystemofriskmanagementandinternalcontrolandthatthesystemisoperatingeffectivelyinallmaterialrespectsinrelationtofinancialreportingrisks.
AsummaryoftheCompany’sRiskManagementPolicyisavailableontheCompany’swebsite.
24
Notes Consolidated
2011$
2010$
Revenue from continuing activities 5 209,669 39,650
Expenditure
Depreciation 6 (32,440) (39,806)
Salariesandemployeebenefitsexpense (558,148) (473,619)
Directorsfees (90,000) (65,000)
Explorationexpenses 6 (3,982,806) (1,536,522)
Explorationexpensesreimbursed 6 1,145,538 871,672
Travelexpenses (209,491) (115,341)
Promotionexpenses (48,626) (26,358)
Administrationexpenses (120,207) (97,953)
Consultingexpenses (261,340) (14,533)
Insuranceexpenses (48,079) (44,654)
Sharebasedpaymentexpense 28 (245,835) (361,250)
Lossfromequipmentsales - (1,873)
Otherexpenses (220,040) (192,481)
Loss from continuing operations before income tax (4,461,805) (2,058,068)
Income tax benefit/(expense) 7 - -
Loss from continuing operations after income tax (4,461,805) (2,058,068)
Other comprehensive income
Changetoavailable-for–salefinancialassets,netoftax 8,336 -
Exchangedifferencesontranslationofforeignoperations (126,411) (14,808)
Other comprehensive income for the year net of tax (118,075) (14,808)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (4,579,880) (2,072,876)
Basiclosspershare(centspershare) 23 (1.2) (0.9)
Dilutedlosspershare(centspershare) (1.2) (0.9)
TheaboveConsolidatedStatementsofComprehensiveIncomearetobereadinconjunctionwiththeNotestotheFinancialStatements.
Consolidated Statements of Comprehensive IncomeYEAR ENDED 30 JUNE 2011
25
Notes Consolidated
2011$
2010$
ASSETS
Current Assets
Cashandcashequivalents 19 4,689,383 5,242,755
Tradeandotherreceivables 8 879,826 153,391
Total Current Assets 5,569,209 5,396,146
Non-Current Assets
Availableforsaleinvestments 9 49,280 -
Plantandequipment 10 118,598 100,894
Capitalisedexplorationexpenditure 11 1,331,811 1,109,034
Otherfinancialassets 12 45,378 22,308
Total Non-Current Assets 1,545,067 1,232,236
TOTAL ASSETS 7,114,276 6,628,382
LIABILITIES
Current Liabilities
Tradeandotherpayables 14 766,861 319,523
Provisions 15 133,959 35,758
Total Current Liabilities 900,820 355,281
Non-Current Liabilities
Provisions 15 37,686 105,176
Total Non-Current Liabilities 37,686 105,176
TOTAL LIABILITIES 938,506 460,457
NET ASSETS 6,175,770 6,167,925
EQUITY
Contributedequity 16 39,592,568 35,250,678
Reserves 17(a) 1,166,168 1,038,408
Accumulatedlosses (34,582,966) (30,121,161)
TOTAL EQUITY 6,175,770 6,167,925
TheaboveConsolidatedStatementsofFinancialPositionaretobereadinconjunctionwiththeNotestotheFinancialStatements
Consolidated Statements of Financial Position at 30 JUNE 2011
26
30 JUNE 2011
IssuedShare Capital
$
Share Option Reserve
$
Available for Sale Assets
Reserve$
Foreign Currency
Translation Reserve
$
AccumulatedLosses
$Total
$
Balance at 1 July 2010 35,250,678 1,264,942 - (226,534) (30,121,161) 6,167,925
Lossforperiod - - - - (4,461,805) (4,461,805)Other comprehensive income
Exchange differences on translation of foreignoperations - - - (126,411) - (118,075)
Changeinfairvalueofavailable-for-salefinancialassets - - 8,336 - - 8,336
Total other comprehensive loss - - 8,336 (126,411) - (118,075)
Total comprehensive loss for the period - - 8,336 (126,411) (4,461,805) (4,579,880)
Transactions with owners in their capacity as owners:
Issueofsharecapitalnetoftransactioncosts 4,341,890 - - - - 4,341,890
Sharebasedpayments - 245,835 - - - 245,835
Totaltransactionswithowners 4,341,890 245,835 - - - 4,587,725
Balance as at 30 June 2011 39,592,568 1,510,777 8,336 (352,945) (34,582,966) 6,175,770
30 JUNE 2010
IssuedShare Capital
$
Share Option Reserve
$
Available for Sale Assets
Reserve$
Foreign Currency
Translation Reserve
$
AccumulatedLosses
$Total
$
Balance at 1 July 2009 29,459,548 903,692 - (211,726) (28,063,093) 2,088,421
Lossforperiod - - - - (2,058,068) (2,058,068)Other comprehensive income
Exchange differences on translation of foreignoperations - - - (14,808) - (14,808)
Total other comprehensive loss - - - (14,808) - (14,808)
Total comprehensive loss for the period - - - (14,808) (2,058,068) (2,072,876)
Transactions with owners in their capacity as owners:
Issueofsharecapitalnetoftransactioncosts 5,791,130 - - - 5,791,130
Sharebasedpayments - 361,250 - - 361,250
Totaltransactionswithowners 5,791,130 361,250 - - 6,152,380
Balance as at 30 June 2010 35,250,678 1,264,942 (226,534) (30,121,161) 6,167,925
TheaboveConsolidatedStatementsofChangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.
Consolidated Statements of Changes in Equity
27
Notes Consolidated
2011$
2010$
CASH FLOWS FROM OPERATING ACTIVITIES
Paymentstosuppliersandemployees (1,247,350) (1,000,807)
Interestreceived 166,075 28,875
Expenditureonmininginterests (3,317,751) (584,634)
NETCASH(OUTFLOW)INFLOWFROMOPERATINGACTIVITIES 19(b) (4,399,026) (1,556,566)
CASH FLOWS FROM INVESTING ACTIVITIES
Paymentsforplantandequipment (56,882) (2,807)
Optionpaymentsforprojects (357,264) (422,945)
Securitydeposits (23,070) -
NETCASH(OUTFLOW)INFLOWFROMINVESTINGACTIVITIES (437,216) (425,752)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceedsfromissueofordinaryshares 4,570,410 6,040,258
Shareissuecosts (304,853) (172,795)
NETCASH(OUTFLOW)INFLOWFROMFINANCINGACTIVITIES 4,265,557 5,867,463
NETINCREASE(DECREASE)INCASHANDCASHEQUIVALENTS (570,685) 3,885,145
Cashandcashequivalentsatthebeginningofthefinancialyear 5,242,755 1,345,997
Effectofexchangeratechangesoncashandcashequivalents 17,313 11,613
CASH AND CASH EQUIVALENTS AT END OF YEAR 19(a) 4,689,383 5,242,755
TheaboveConsolidatedStatementsofCashFlowsaretobereadinconjunctionwiththeNotestotheFinancialStatements.
Consolidated Statements of cash flowsYEAR ENDED 30 JUNE 2011
28
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Theprincipalaccountingpoliciesadoptedinthepreparationofthefinancialreportaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.ThefinancialreportincludesseparatefinancialstatementsforAzureMineralsLimitedasanindividualentityandtheconsolidatedentityconsistingofAzureMineralsLimitedanditssubsidiaries.
BASIS OF PREPARATION
This general purpose financial report has been prepared in accordancewith theAustralianAccounting Standards, other authoritivepronouncementsoftheAustralianAccountingStandardsBoard,AustralianAccountingInterpretationsandtheCorporationsAct2001.
Compliance with AIFRSs
TheconsolidatedfinancialstatementsofAzureMineralsLimitedandtheseparatefinancialstatementsofAzureMineralsLimitedalsocomplywithInternationalFinancialReportingStandards(IFRS)asissuedbytheInternationalAccountingStandardsBoard(IASB).
Historical cost convention
Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconvention.
Critical accounting estimates
ThepreparationoffinancialstatementsinconformitywithAIFRSrequirestheuseofcertaincriticalaccountingestimates.ItalsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheGroup’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatementsaredisclosedinnote3.
Going Concern
This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and therealisationofassetsandsettlementofliabilitiesinthenormalcourseofbusiness.
TheConsolidated Entity has incurred a net loss after tax for the year ended 30 June 2011 of $4,461,805 (2010: $2,058,068) andexperiencednetcashoutflowsfromoperatingactivitiesof$4,399,026(2010:$1,556,566).At30June2011,theConsolidatedEntityhadnetcurrentassetsof$4,668,389(30June2010:netcurrentassetsof$5,040,865).
TheDirectorsbelievetherearesufficientfundstomeettheConsolidatedEntity’sworkingcapitalrequirementsandasatthedateofthisreportthedirectorsbelievetheycanmeetallliabilitiesasandwhentheyfalldue.HowevertheDirectorsrecognisethatadditionalfundingeitherthroughtheissueoffurthershares,convertiblenotesoracombinationofbothmayberequiredfortheConsolidatedEntitytocontinuetoactivelyexploreitsmineralpropertiesinthelongterm.
TheDirectorshavereviewedthebusinessoutlookandtheassetsandliabilitiesoftheConsolidatedEntityandareoftheopinionthattheuseofthegoingconcernbasisofaccountingisappropriate.
However,iftheConsolidatedEntityisunabletoachievetheabove,thereissignificantuncertaintywhethertheConsolidatedEntitywillbeabletocontinueasagoingconcernandthereforewhetheritwillbeabletopayitsdebtsasandwhentheyfalldueandrealiseitsassetsandextinguishitsliabilitiesinthenormalcourseofbusinessattheamountsstatedinthefinancialreport.
Thefinancialreportdoesnotincludeanyadjustmentsrelatingtotherecoverabilityorclassificationofrecordedassetamounts,northeamountsorclassificationofliabilitiesthatmightbenecessaryshouldtheConsolidatedEntitynotbeabletocontinueasagoingconcern.
(a) Principles of consolidation
Theconsolidatedfinancialstatementsarethoseoftheconsolidatedentity,comprisingAzureMineralsLimited(theparententity)andallentitieswhichAzureMineralsLimitedcontrolledfromtimetotimeduringtheyearandatbalancedate(“theGroup”).AcontrolledentityisanyentityAzureMineralsLimitedhasthepowertocontrolthefinancialandoperatingpoliciesofsoastoobtainbenefitsfromitsactivities.
Informationfromthefinancialstatementsofsubsidiariesisincludedfromthedatetheparentcompanyobtainscontroluntilsuchtimeascontrolceases.Wherethereislossofcontrolofasubsidiary,theconsolidatedfinancialstatementsincludetheresultsforthepartofthereportingperiodduringwhichtheparentcompanyhascontrol.
Subsidiaryacquisitionsareaccountedforusingtheacquisitionmethodofaccounting.
Thefinancial statementsof subsidiaries areprepared for the same reportingperiodas theparententity, using consistent accountingpolicies.Adjustmentsaremadetobringintolineanydissimilaraccountingpolicieswhichmayexist.
Allintercompanybalancesandtransactions,includingunrealisedprofitsarisingfromintragrouptransactions,havebeeneliminatedinfull.Unrealisedlossesareeliminatedunlesscostscannotberecovered.
29
InvestmentsinsubsidiariesareaccountedforatcostintheindividualfinancialstatementsofAzureMineralsLimited.
(b) Property, plant and equipment
Eachclassofproperty,plantandequipmentiscarriedatcostless,whereapplicable,anyaccumulateddepreciationandimpairmentlosses.
Plant and equipment
Plantandequipmentaremeasuredonthecostbasis.Thecarryingamountofplantandequipmentisreviewedannuallybydirectorstoensureitisnotinexcessoftherecoverableamountfromtheseassets.
Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancearechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Depreciation
Depreciationofplantandequipmentiscalculatedonareducingbalancebasissoastowriteoffthenetcostsofeachassetovertheexpectedusefullife.Theratesvarybetween20%and40%perannum.
Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachreportingdate.
An asset’s carrying amount iswrittendown immediately to its recoverable amount if the asset’s carrying amount is greater than itsestimatedrecoverableamount.
Gainsandlossesondisposalsaredeterminedbycomparingproceedswithcarryingamount.Theseareincludedintheincomestatement.Whenrevaluedassetsaresold,itisgrouppolicytotransfertheamountsincludedinotherreservesinrespectofthoseassetstoretainedearnings.
(d) Exploration and evaluation costs
Explorationandevaluationcostsarewrittenoff intheyeartheyare incurredapart fromacquisitioncostswhicharecarried forwardwhererightoftenureoftheareaofinterestiscurrentandtheyareexpectedtoberecoupedthroughsaleorsuccessfuldevelopmentandexploitationoftheareaofinterestor,whereexplorationandevaluationactivitiesintheareaofinteresthavenotreachedastagethatpermitsreasonableassessmentoftheexistenceofeconomicallyrecoverablereserves.
Whereanareaofinterestisabandonedorthedirectorsdecidethatitisnotcommercial,anyaccumulatedacquisitioncostsinrespectofthatareaarewrittenoffinthefinancialperiodthedecisionismade.Eachareaofinterestisalsoreviewedattheendofeachaccountingperiodandaccumulatedcostswrittenofftotheextentthattheywillnotberecoverableinthefuture.
Amortisationisnotchargedoncostscarriedforwardinrespectofareasofinterestinthedevelopmentphaseuntilproductioncommences.
(e) Leases
Leasesoffixedassetswheresubstantiallyalltherisksandbenefitsincidentaltotheownershipoftheasset,butnotthelegalownershipthataretransferredtoentitiesintheeconomicentityareclassifiedasfinanceleases.
Financeleasesarecapitalisedbyrecordinganassetandaliabilityattheloweroftheamountsequaltothefairvalueoftheleasedpropertyorthepresentvalueoftheminimumleasepayments,includinganyguaranteedresidualvalues.Leasepaymentsareallocatedbetweenthereductionoftheleaseliabilityandtheleaseinterestexpensefortheperiod.
Leasedassetsaredepreciatedonastraight-linebasisovertheirestimatedusefullives.
Leasepaymentsforoperatingleases,wheresubstantiallyalltherisksandbenefitsremainwiththelessor,arechargedonastraightlinebasisovertheperiodofthelease.
Leaseincentivesunderoperatingleasesarerecognisedasaliabilityandamortisedonastraight-linebasisoverthelifeoftheleaseterm.
(f) Income tax
Thechargeforcurrentincometaxexpenseisbasedontheprofitfortheyearadjustedforanynon-assessableordisalloweditems.Itiscalculatedusingthetaxratesthathavebeenenactedoraresubstantiallyenactedbythestatementoffinancialpositiondate.
Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectoftemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements.Nodeferredincometaxwillberecognisedfromtheinitialrecognitionofanassetorliability,excludingabusinesscombination,wherethereisnoeffectonaccountingortaxableprofitorloss.
Deferredtaxiscalculatedatthetaxratesthatareexpectedtoapplytotheperiodwhentheassetisrealisedorliabilityissettled.Deferredtaxiscreditedintheincomestatementexceptwhereitrelatestoitemsthatmaybecrediteddirectlytoequity,inwhichcasethedeferredtaxisadjusteddirectlyagainstequity.
30
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Deferredincometaxassetsarerecognisedtotheextentthatitisprobablethatfuturetaxprofitswillbeavailableagainstwhichdeductibletemporarydifferencescanbeutilised.
Theamountofbenefitsbroughttoaccountorwhichmayberealisedinthefutureisbasedontheassumptionthatnoadversechangewilloccurinincometaxationlegislationandtheanticipationthattheeconomicentitywillderivesufficientfutureassessableincometoenablethebenefittoberealisedandcomplywiththeconditionsofdeductibilityimposedbythelaw.
(g) Goods and Services Tax (GST)
Revenues,expensesandassetsarerecognisednetoftheamountofGST,exceptwheretheamountofGSTincurredisnotrecoverablefromtheAustralianTaxOffice.InthesecircumstancestheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartofanitemoftheexpense.ReceivablesandpayablesinthestatementoffinancialpositionareshowninclusiveofGST.
Cashflowsarepresentedinthecashflowstatementonagrossbasis,exceptfortheGSTcomponentofinvestingandfinancingactivities,whicharedisclosedasoperatingcashflows.
(h) Foreign currency translation
Functional and presentation currency
Thefunctionalcurrencyofeachofthegroup’sentitiesismeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichthatentityoperates.TheconsolidatedfinancialstatementsarepresentedinAustraliandollarswhichisAzureMineralsLimited’sfunctionalandpresentationcurrency.ThefunctionalcurrencyofAustraliansubsidiary(AzureMexicoPtyLtd)istheAustraliandollar.ThefunctionalcurrencyoftheMexicanoverseassubsidiary(MineraPiedraAzulCVdeSA)istheMexicanPeso.
Transactions and balances
Foreigncurrencytransactionsaretranslatedintofunctionalcurrencyusingtheexchangeratesprevailingatthedateofthetransaction.Foreigncurrencymonetaryitemsaretranslatedattheyear-endexchangerate.Non-monetaryitemsmeasuredathistoricalcostcontinuetobecarriedattheexchangerateatthedateofthetransaction.Non-monetaryitemsmeasuredatfairvaluearereportedattheexchangerateatthedatewhenfairvaluesweredetermined.
Exchangedifferencesarisingonthetranslationofmonetaryitemsarerecognisedintheprofitorloss,exceptwheredeferredinequityasaqualifyingcashflowornetinvestmenthedge.
Group companies
Thefinancialresultsandpositionofforeignoperationswhosefunctionalcurrencyisdifferentfromthegroup’spresentationcurrencyaretranslatedasfollows:
• assetsandliabilitiesaretranslatedatyear-endexchangeratesprevailingatthatreportingdate;and• incomeandexpensesaretranslatedataverageexchangeratesfortheperiod.
Exchangedifferencesarisingontranslationofforeignoperationsaretransferreddirectlytothegroup’sforeigncurrencytranslationreserveinthestatementoffinancialposition.Thesedifferencesarerecognisedintheprofitorlossintheperiodinwhichtheoperationisdisposed.
(i) Trade and other payables
Liabilitiesfortradecreditorsarerecognisedinitiallyatfairvalueandsubsequentlyatamortisedcost.
Payablestorelatedpartiesarecarriedattheprincipalamount.Interest,whenchargedbythelender,isrecognisedasanexpenseonanaccrualbasis.
(j) Employee benefits
Provisionismadeforemployeebenefitsaccumulatedasaresultofemployeesrenderingservicesuptothereportingdate.Thesebenefitsincludewagesandsalaries,annualleave,andlongserviceleave.
Liabilitiesarising inrespectofwagesandsalaries,annual leaveandanyotheremployeebenefitsexpectedtobesettledwithintwelvemonthsofthereportingdatearemeasuredattheirnominalamountsbasedonremunerationrateswhichareexpectedtobepaidwhentheliabilityissettled.Allotheremployeebenefitliabilitiesaremeasuredatthepresentvalueoftheestimatedfuturecashoutflowtobemadeinrespectofservicesprovidedbyemployeesuptothereportingdate.Indeterminingthepresentvalueoffuturecashoutflows,themarketyieldasatthereportingdateonnationalgovernmentbonds,whichhavetermstomaturityapproximatingthetermsoftherelatedliability,areused.
Notes to the Consolidated Financial Statements (cont’d)
31
Share-based payments
TheGroupprovidesbenefitstoemployees(includingdirectors)oftheGroupintheformofshare-basedpaymenttransactions,wherebyemployeesrenderservicesinexchangeforsharesorrightsovershares(‘equity-settledtransactions’).
Thecostoftheseequity-settledtransactionswithemployeesismeasuredbyreferencetothefairvalueatthedateatwhichtheyaregranted.ThefairvalueisdeterminedbyaninternalvaluationusingaBinomialoptionpricingmodel.
The costof equity-settled transactions is recognised, togetherwith a corresponding increase inequity,over theperiod inwhich theperformanceconditionsarefulfilled,endingonthedateonwhichtherelevantemployeesbecomefullyentitledtotheaward(‘vestingdate’).
Thecumulativeexpense recognised forequity-settled transactionsateach reportingdateuntil vestingdate reflects (i) theextent towhichthevestingperiodhasexpiredand(ii)thenumberofoptionsthat,intheopinionofthedirectorsoftheGroup,willultimatelyvest.Thisopinionisformedbasedonthebestavailableinformationatreportingdate.Noadjustmentismadeforthelikelihoodofmarketperformanceconditionsbeingmetastheeffectoftheseconditionsisincludedinthedeterminationoffairvalueatgrantdate.
Noexpenseisrecognisedforawardsthatdonotultimatelyvest,exceptforawardswherevestingisconditionaluponamarketcondition.
Whereanequity-settledawardiscancelled,itistreatedasifithadvestedonthedateofcancellation,andanyexpensenotyetrecognisedfortheawardisrecognisedimmediately.However,ifanewawardissubstitutedforthecancelledaward,anddesignatedasareplacementawardonthedatethatitisgranted,thecancelledandnewawardaretreatedasiftheywereamodificationoftheoriginalaward.
(k) Revenue recognition
Interestrevenueisrecognisedonatimeproportionatebasisthattakesintoaccounttheeffectiveyieldonthefinancialassets.
(l) Contributed Equity
Ordinarysharesareclassifiedasequity.
Anytransactioncostsarisingontheissueofordinarysharesarerecogniseddirectlyinequityasareductionoftheshareproceedsreceived.
(m) Earnings per share (EPS)
Basic earnings per share
BasicEPS iscalculatedas theprofitattributable toequityholdersof thecompany,excludinganycostsof servicingequityother thanordinaryshares,dividedbytheweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear,adjustedforanybonuselementsinordinarysharesissuedduringtheyear.
Diluted earnings per share
DilutedEPSadjuststhefiguresusedinthedeterminationofbasicEPStotakeintoaccounttheafterincometaxeffectofinterestandotherfinancingcostsassociatedwithdilutivepotentialordinarysharesandtheweightedaveragenumberofsharesassumedtohavebeenissuedfornoconsiderationinrelationtodilutivepotentialordinaryshares.
(n) Cash and cash equivalents
Cashandcashequivalentsincludecashonhand,depositsheldatcallwithbanks,othershorttermhighlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts.Bankoverdraftsareshownwithinshorttermborrowingsincurrentliabilitiesonthestatementoffinancialposition.
(o) Comparative figures
WhenrequiredbyAccountingStandards,comparativefigureshavebeenadjustedtoconformtochangesinpresentationforthecurrentfinancialyear.
(p) Interests in joint ventures
TheGroupsshareoftheassets,liabilities,revenueandexpensesofjointventureoperationsareincludedintheappropriateitemsoftheconsolidatedincomestatementandstatementoffinancialposition.
(q) Segment reporting
Operatingsegmentsarereported inamannerconsistentwiththe internalreportingtothechiefoperatingdecisionmaker.Thechiefoperatingdecisionmaker,who is responsible forallocatingresourcesandassessingperformanceof theoperatingsegments,hasbeenidentifiedastheExecutiveChairman.
32
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(r) Investments and Financial assets
Classification
TheGroupclassifiesitsfinancialassetsinthefollowingcategories:loansandreceivables.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatinitialrecognition.
Financialassetsatfairvaluethroughprofitandloss
Financialassetsat fairvaluethroughprofitand lossarefinancialassetsheldfortrading.Afinancialasset isclassified inthiscategory ifacquiredprincipally forthepurposeofselling intheshortterm.Derivativesareclassifiedasheldfortradingunlesstheyaredesignedashedges.Assetsinthiscategoryareclassifiedascurrentassetsiftheyareexpectedtobesettledwith12months;otherwisetheyareclassifiedasnon-current.
Loans and receivables
Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarketandarerecognisedatfairvalueoninitialrecognition.Theyareincludedincurrentassets,exceptforthosewithmaturitiesgreaterthan12monthsafter thereportingdatewhichareclassifiedasnon-currentassets.Loansandreceivablesare included in tradeandotherreceivablesinthestatementoffinancialpositionsheet(note8).
Recognition and derecognition
Regularpurchasesandsalesoffinancialassetsarerecognisedontrade-date–thedateonwhichtheGroupcommitstopurchaseorselltheasset. Investmentsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.FinancialassetsarederecognisedwhentherighttoreceivecashflowsfromthefinancialassetshaveexpiredorhavebeentransferredandtheGrouphastransferredsubstantiallyalltherisksandrewardsofownership.
Subsequent measurement
Loansandreceivablesarecarriedatamortisedcostusingeffectiveinterestmethod.
Impairment
TheGroupassessesateachreportingdatewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsisimpaired.Impairmentlossesarerecognisedintheprofitorloss.Debtswhichareknowntobeuncollectiblearewrittenoffbyreducingthecarryingamountdirectly.
(s) Fair value estimation
Thefairvalueoffinancialassetsandfinancialliabilitiesmustbeestimatedforrecognitionandmeasurementorfordisclosurepurposes.
The fair value of financial instruments traded in activemarkets (such as publicly traded derivative, and trading and available-for-salesecurities) isbasedonquotedmarketpricesatthebalancesheetdate.ThequotedmarketpriceusedforfinancialassetsheldbytheGroupisthecurrentbidprice.
Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarket(forexample,over-the-counterderivatives)isdeterminedusingvaluationtechniques.TheGroupusesavarietyofmethodsandmakesassumptionsthatarebasedonmarketconditionsexistingateachreportingdate.Quotedmarketpricesordealerquotesforsimilarinstrumentsareusedforlong-termdebtinstrumentsheld.Othertechniques,suchasestimateddiscountedcashflow,areusedtodeterminedfairvaluefortheremainingfinancialinstruments.Thefairvalueofinterestrateswapsiscalculatedasthepresentvalueoftheestimatedfuturecashflows.Thefairvalueofforwardexchangecontractsisdeterminedusingforwardexchangemarketratesatthereportingdate.
Thecarryingvaluelessimpairmentprovisionoftradereceivablesandpayablesareassumedtoapproximatetheirfairvaluesduetotheirshort-termnature.ThefairvalueoffinancialliabilitiesfordisclosurepurposesisestimatedbydiscountingthefuturecontractualcashflowsatthecurrentmarketinterestratethatisavailabletotheGroupforsimilarfinancialinstruments.
(t) Provisions
Provisionsforlegalclaims,servicewarrantiesandmakegoodobligationsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourceswillberequiredtosettletheobligationandtheamounthasbeenreliablyestimated.Provisionsarenotrecognisedforfutureoperatinglosses.
Wherethereareanumberofsimilarobligations,thelikelihoodthatanoutflowwillberequiredinsettlementisdeterminedbyconsideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.
Notes to the Consolidated Financial Statements (cont’d)
33
Provisionsaremeasuredatthepresentvalueofmanagement’sbestestimateoftheexpenditurerequiredtosettlethepresentobligationatthereportingdate.Thediscountrateusedtodeterminethepresentvaluereflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheliability.Theincreaseintheprovisionduetothepassageoftimeisrecognisedasinterestexpense.
(u) New and amended standards adopted by the Group
Thefollowingnewstandardsandamendmentstostandardsaremandatoryforthefirsttimeforthefinancialyearbeginning1July2010:
• AASB2009-5FurtherAmendmentstoAustralianAccountingStandardsarisingfromtheAnnualImprovementsProject;• AASB2009-8AmendmentstoAustralianAccountingStandards-GroupCash-settledShare-basedPaymentTransactions;• AASB2009-10AmendmentstoAustralianAccountingStandards-ClassificationofRightsIssues;and• AASB2010-3AmendmentstoAustralianAccountingStandardsarisingfromtheAnnualImprovementsProject.
Theadoptionofthesestandardsdidnothaveanyimpactonthecurrentperiodoranypriorperiodandisnotlikelytoaffectfutureperiods.
(v) New accounting standards and interpretations not yet adopted
Certainnewaccountingstandardsandinterpretationshavebeenpublishedthatarenotmandatoryfor30June2011reportingperiodsandhavenotyetbeenappliedinthefinancialreport.TheGroup’sassessmentoftheimpactofthesenewstandardsandinterpretationsissetoutbelow.
• AASB2010-6Amendments toAustralianAccounting Standards -DisclosuresonTransfersof FinancialAssets (effective forannualreportingperiodsbeginningonorafter1July2011).AmendmentsmadetoAASB7FinancialInstruments:DisclosuresinNovember2010,introduceadditionaldisclosuresinrespectofriskexposuresarisingfromtransferredfinancialassets.Theamendments are not expected to have any significant impacton theGroup’s disclosures.TheGroup intends to apply theamendmentfrom1July2011.
• AASB10ConsolidatedFinancialStatements(effectivefortheannualreportingperiodscommencingonorafter1January2013).AASB10introducescertainchangestotheconsolidationprinciples,includingtheconceptofdefactocontrolandchangesinrelationtothespecialpurposeentities.AzureMineralsLimitediscontinuingtoassesstheimpactofthestandard.
• AASB 11 JointArrangements (effective for the annual reporting periods commencing on or after 1 January 2013).AASB11 introducescertainchanges to theaccounting for joint arrangements. Joint arrangementswillbeclassifiedaseither jointoperations(wherepartieswithjointcontrolhaverightstoassetsandobligationsforliabilities)orjointventures(wherepartieswithjointcontrolhaverightstothenetassetsofthearrangement). Jointarrangementsstructuredasaseparatevehiclewillgenerallybetreatedasjointventuresandaccountedforusingtheequitymethod.AzureMineralsLimitediscontinuingtoassesstheimpactofthestandard.
• AASB13FairValueMeasurement(effectiveforannualreportingperiodscommencingonorafter1January2013).AASB13establishesasingleframeworkformeasuringfairvalueoffinancialandnon-financialitemsrecognisedatfairvalueonthebalancesheetordisclosed inthenotestothefinancialstatements.AzureMineralsLimited iscontinuingtoassessthe impactofthestandard.
• AASB2011-9PresentationofFinancialStatements(effectiveforannualreportingperiodscommencingonorafter1July2013).AASB101,amendedinJune2011,introducesamendmentstoalignthepresentationitemsofothercomprehensiveincomewithUSGAAP.AzureMineralsLimitedwillapplytheamendedstandardfrom1July2013.Whenthestandardisfirstadopted,therewillbechangestothepresentationofthestatementofcomprehensiveincome.However,therewillbenoimpactonanyoftheamountsrecognisedinthefinancialstatements.
• AASB1054AustralianAdditionalDisclosures(effectiveforannualreportingperiodsbeginningonorafter1July2011).AASB1054, issued inMay 2011, moves additionalAustralian specific disclosure requirements for for-profit entities from variousAustralianAccountingStandards into thisStandardasa resultofTrans-TasmanConvergenceProject.AASB1054AustralianAdditionalDisclosuresremovestherequirementtodiscloseeachclassofcapitalcommitmentscontractedforattheendofthereportingperiod(otherthancommitmentsforthesupplyofinventories).Whenthestandardisadoptedforthefirsttimeforthefinancialyearending30June2012,thefinancialstatementswillnolongerincludedisclosuresaboutcapitalandotherexpenditurecommitmentsasthesearenolongerrequiredbyAASB1054.
• AASB9FinancialInstrumentsandAASB2009-11AmendmentstoAustralianAccountingStandardsarisingfromAASB9andAASB2010-7AmendmentstoAustralianAccountingStandardsarisingfromAASB9(December2010)(effectiveforannualreportingperiodsbeginningonorafter1January2013).AASB9addressestheclassification,measurementandderecognitionoffinancialassetsandfinancialliabilities.Thestandardisnotapplicableuntil1January2013butisavailableforearlyadoption.AzureMineralsLimitediscontinuingtoassessitsfullimpact.
34
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
• RevisedAASB124RelatedPartyDisclosuresandAASB2009-12AmendmentstoAustralianAccountingStandards(effectiveforannualreportingperiodsbeginningonorafter1January2011).InDecember2009theAASBissuedarevisedAASB124RelatedPartyDisclosures.Itiseffectiveforaccountingperiodsbeginningonorafter1January2011andmustbeappliedretrospectively.Theamendmentclarifiesandsimplifiesthedefinitionofarelatedparty.AzureMineralsLimitedwillapplytheamendedstandardfrom1July2011.Whentheamendmentsareapplied,AzureMineralsLimitedwillneedtodiscloseanytransactionsbetweenitssubsidiariesanditsassociates.However,therewillbenoimpactonanyoftheamountsrecognisedinthefinancialstatements.
• AASB1053ApplicationofTiersofAustralianAccountingStandardsandAASB2010-2AmendmentstoAustralianAccountingStandardsarising fromReducedDisclosureRequirements(effectivefrom1July2013).On30June2010theAASBofficiallyintroducedareviseddifferentialreportingframeworkinAustralia.Underthisframework,atwo-tierdifferentialreportingregimeappliestoallentitiesthatpreparegeneralpurposefinancialstatements.AzureMineralsLimitedislistedontheASXandisnoteligibletoadoptthenewAustralianAccountingStandards-ReducedDisclosureRequirements.Thetwostandardswillthereforehavenoimpactonthefinancialstatementsoftheentity.
• AASB2010-8AmendmentstoAustralianAccountingStandards-DeferredTax:RecoveryofUnderlyingAssets(effectivefrom1January2012).InDecember2010,theAASBamendedAASB112IncomeTaxestoprovideapracticalapproachformeasuringdeferredtaxliabilitiesanddeferredtaxassetswheninvestmentproperty ismeasuredusingthefairvaluemodel.AASB112requiresthemeasurementofdeferredtaxassetsandliabilitiestoreflectthetaxconsequencesthatwouldfollowfromthewaymanagementexpectstorecoverorsettlethecarryingamountoftherelevantassetsorliabilities,thatisthroughuseorthroughsale.Theamendmentintroducesarebuttablepresumptionthatinvestmentpropertywhichismeasuredatfairvalueisrecoveredentirelybysale.TheamendmentisnotexpectedtohaveanysignificantimpactonAzureMineralsLimited’sfinancialstatements.AzureMineralsLimitedintendstoapplytheamendmentfrom1July2012.
• AASB119 - Eliminationof the‘corridor’ approach for deferring gains/losses for definedbenefit plans, actuarial gains/losseson remeasuring thedefinedbenefitplanobligation/asset tobe recognised inOCI rather than inprofitor loss, andcannotbereclassified insubsequentperiods,subtleamendmentstotiming forrecognitionof liabilities forterminationbenefits,andemployeebenefitsexpectedtobesettled(asopposedtoduetosettledundercurrentstandard)within12monthsaftertheendofthereportingperiodareshort-termbenefits,andthereforenotdiscountedwhencalculatingleaveliabilities.Annualleavenotexpectedtobeusedwithin12monthsofendofreportingperiodwillinfuturebediscountedwhencalculatingleaveliability.Thisstandardhasnoimpactastherearenoannualleaveprovisionamountsthatarenon-current.AzureMineralsLimitedwillapplythisfrom1July2013.
Notes to the Consolidated Financial Statements (cont’d)
35
2 . FINANCIAL RISK MANAGEMENT
Overview
TheCompanyandGrouphaveexposuretothefollowingrisksfromtheiruseoffinancialinstruments:
• creditrisk• liquidityrisk• marketrisk
Thisnotepresents informationabout theCompany’sandGroup’sexposure toeachof theabove risks, theirobjectives,policiesandprocessesformeasuringandmanagingrisk,andthemanagementofcapital.
TheBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheriskmanagementframework.Managementmonitorsandmanagesthefinancialrisksrelatingtotheoperationsofthegroupthroughregularreviewsoftherisks.
Credit risk
CreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarisesprincipallyfromtheGroup’sreceivablesfromcustomersandcashandcashequivalents.FortheCompanyitarisesfromreceivablesduefromsubsidiaries.
Cash and Cash Equivalents
TheGroupmanagesitscreditriskoncashandcashequivalentsbyonlydealingwithbankslicensedtooperateinAustralia.
Trade and other receivables
AstheGroupoperatesintheminingexplorationsector, itgenerallydoesnothavetradereceivablesandthereforeisnotexposedtocreditriskinrelationtotradereceivables.
Presently,theGroupundertakesexplorationandevaluationactivitiesexclusivelyinMexico.Atthereportingdatetherewerenosignificantconcentrationsofcreditrisk.
Exposure to credit risk
ThecarryingamountoftheGroup’sfinancialassetsrepresentsthemaximumcreditexposure.TheGroup’smaximumexposuretocreditriskatthereportingdatewas:
ConsolidatedCarrying amount
Note 2011 2010
Tradeandotherreceivables 8 863,332 136,752
Cashandcashequivalents 19 4,689,383 5,242,755
Securitydeposits 12 45,378 22,308
Impairment losses
NoneoftheCompany’sotherreceivablesarepastdue(2010:nil).
TheGroupoperates in theminingexploration sector and generallydoesnothave trade receivables and is thereforenotmateriallyexposedtocreditriskinrelationtotradereceivables.OtherreceivablesareprincipallyvalueaddedtaxeswithheldbythirdpartiesandduetotheGroupfromsovereigngovernments,assuchtheGroupdoesnotconsideritisexposedtoanysignificantcreditrisk.
TheallowanceaccountsinrespectofotherreceivablesisusedtorecordimpairmentlossesunlesstheGroupissatisfiedthatnorecoveryoftheamountowingispossible;atthatpointtheamountisconsideredirrecoverableandiswrittenoffagainstthefinancialassetdirectly.At30June2011theGroupdoesnothaveanycollectiveimpairmentsonitsotherreceivables(2010:nil).
Guarantees
Grouppolicyistoprovidefinancialguaranteesonlytowholly-ownedsubsidiaries.Therearenoguaranteesoutstanding(2010:Nil)
36
2 . FINANCIAL RISK MANAGEMENT (Cont’d)
Liquidity risk
LiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheGroup’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheGroup’sreputation.
TheGroupmanagesliquidityriskbymaintainingadequatereservesbycontinuouslymonitoringforecastandactualcashflows.
TheCompanyanticipatesnoneedtoraiseadditionalcapitalinthenext12monthstomeetforecastedoperationalactivities.ThedecisiononhowtheCompanywillraisefuturecapitalwilldependonmarketconditionsexistingatthattime.
Typically theGroupensures that ithas sufficientcashondemand tomeetexpectedoperationalexpenses foraperiodof180days,including theservicingoffinancialobligations; thisexcludes thepotential impactofextremecircumstances thatcannot reasonablybepredicted,suchasnaturaldisasters
Thefollowingarethecontractualmaturitiesoffinancialliabilitiesatamortisedcost:
Consolidated Carrying amount
Contractual cash flows
6 mths or less 6-12 mths 1-2 years 2-5 years
More than 5 years
30 June 2011
Tradeandotherpayables 766,861 - 766,861 - - - -
30 June 2010
Tradeandotherpayables 319,523 - 319,523 - - - -
Market Risk
Marketriskistheriskthatchangesinmarketprices,suchasforeignexchangerates,interestratesandequitypriceswillaffecttheGroup’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturn.
Currency risk
TheGroupisexposedtocurrencyriskonpurchasesthataredenominatedinacurrencyotherthantherespectivefunctionalcurrenciesofGroupentities,primarilytheUnitedSatesDollar(USD)andMexicanPeso(MxP).ThecurrenciesinwhichthetransactionsprimarilyaredenominatedareUSDandMxP.
TheGroup has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts orpaymentsthataredenominatedinaforeigncurrency.
Group’sinvestmentsinitssubsidiariesarenothedgedasthosecurrencypositionsareconsideredtobelongterminnature.
Exposure to currency risk
TheGroup’sexposuretoforeigncurrencyriskatreportingdatewasasfollows,basedonnotionalamounts:
30 June 2011USD
30 June 2010USD
Tradereceivables 581,906 50,894
Tradepayables 207,831 34,744
Grossstatementoffinancialposition 789,737 85,638
Forwardexchangecontracts - -
Netexposure 789,737 85,638
TheCompany’sexposuretoforeigncurrencyriskat30June2011wasnil(2010:Nil).
Notes to the Consolidated Financial Statements (cont’d)
37
Thefollowingsignificantexchangeratesappliedduringtheyear :
Average rate Reporting date spot rate
AUD 2011 2010 2011 2010
USD 0.9892 0.8822 1.0596 0.8567
Sensitivity analysis
Over the reportingperiod therehavebeen significantmovements in theAustraliandollarwhencompared toother currencies, it isthereforeconsideredreasonabletoreviewsensitivitiesbaseona10%movementintheAustraliandollar.A10percentstrengtheningoftheAustraliandollaragainstthefollowingcurrenciesat30Junewouldhaveincreasedequityanddecreaselossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestrates,remainconstant.Theanalysisisperformedonthesamebasisfor2010.
Consolidated
Equity Profit or loss
30 June 2011
USD 78,974 78,974
30 June 2010
USD 8,564 8,564
A10percentweakeningoftheAustraliandollaragainsttheabovecurrenciesat30Junewouldhavehadtheequalbutoppositeeffectontheabovecurrenciestotheamountsshownabove,onthebasisthatallothervariablesremainconstant.
Interest rate risk
InterestrateriskistheriskthattheGroupsfinancialpositionwillbeadverselyaffectedbymovementsininterestratesthatwillincreasethecostsoffloatingratedebtoropportunitylossesthatmayariseonfixedrateborrowingsinafallinginterestrateenvironment.TheGroupdoesnothaveanyborrowingsthereforeisnotexposedtointerestrateriskinthisarea.Interestrateriskoncashandshorttermdepositsisnotconsideredtobeamaterialriskduetotheshorttermnatureofthesefinancialinstruments.
AtthereportingdatetheinterestrateprofileoftheCompany’sandtheGroup’sinterest-bearingfinancialinstrumentswas:
ConsolidatedCarrying amount
2011 2010
Variable rate instruments
Short term cash deposits 4,474,954 4,823,995
Cash flow sensitivity analysis for variable rate instruments
TheGrouphasreviewedthelikelymovementsininterestratesandconsidersthatamovementof+/-100basispointsisreasonable.
Group Sensitivity
At30June2011ifinterestrateshadchanges+/-100basispointsfromyearendrateswithallothervariablesheldconstant,equityandposttaxprofitwouldhavebeen$44,749higher/lower(2010–changeof100basispoints:$48,240higher/lower).
38
2 . FINANCIAL RISK MANAGEMENT (Cont’d)
Fair values
Fair values versus carrying amounts
Thefairvaluesoffinancialassetsandliabilities,togetherwiththecarryingamountsshowninthebalancesheet,areasfollows:
Consolidated 30 June 2011 30 June 2010
Carrying amount Fair value Carrying amount Fair value
Tradeandotherreceivables 879,826 879,826 153,391 153,391
Cashandcashequivalents 4,689,383 4,689,383 5,242,755 5,242,755
Otherfinancialassets 45,378 45,378 22,308 22,308
Tradeandotherpayables (766,861) (766,861) (319,523) (319,523)
Themethodsandassumptionsusedtoestimatethefairvalueofinstrumentsare:
Capital Management
TheGroup’sobjectiveswhenmanagingcapitalistosafeguarditsabilitytocontinueasagoingconcern,sothatitcancontinuetoprovidereturnsforshareholdersandbenefitsofotherstakeholdersandtomaintainanoptimalcapitalstructuretoreducethecostofcapital.
Inordertomaintainoradjustthecapitalstructure,theGroupmayissuenewsharesorsellassets.
TherewerenochangesintheGroup’sapproachtocapitalmanagementduringtheyear.
NeithertheCompanynoranyofitssubsidiariesaresubjecttoexternallyimposedcapitalrequirements.
3. CRITICAL ACCOUNTING ESTIMATES AND SIGNIFICANT JUDGEMENTS
Thecarryingamountsofcertainassetsand liabilitiesareoftendeterminedbasedonestimatesandassumptionsof futureevents.Thekeyestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofcertainassetsandliabilitieswithinthenextannualreportingperiodare:
Sharebasedpaymenttransactions
TheGroupmeasuresthecostofequity-settledtransactionswithemployeesbyreferencetothefairvalueoftheequityinstrumentsatthedateatwhichtheyaregranted.ThefairvalueisdeterminedbyaninternalvaluationusingaBinomialoptionpricingmodel.
Explorationandevaluationcosts
Explorationandevaluationcostsarewrittenoffintheyeartheyareincurredapartfromacquisitioncostswhicharecarriedforwardwhererightoftenureoftheareaofinterestiscurrent.Thefuturerecoverabilityofexplorationandevaluationexpenditureisdependentonanumberoffactors,includingwhethertheGroupdecidestoexploittherelatedleaseitself,or,ifnot,whetheritsuccessfullyrecoverstherelatedexplorationandevaluationassetsthroughsale.
Factorsthatcouldimpactthefuturerecoverabilityincludethelevelofreservesandresources,futuretechnologicalchanges,whichcouldimpactthecostofmining,futurelegalchanges(includingchangestoenvironmentalrestorationobligations)andchangestocommodityprices.
Totheextentthatcapitalisedexplorationandevaluationexpenditureisdeterminednottoberecoverableinthefuture,profitsandnetassetswillbereducedintheperiodinwhichthisdeterminationismade.
Notes to the Consolidated Financial Statements (cont’d)
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4. SEGMENT INFORMATION
TheCompanycurrentlydoesnothaveproductionand isonly involved inexploration. Asaconsequence,activities in theoperatingsegmentsareidentifiedbymanagementbasedonthemannerinwhichresourcesareallocated,thenatureoftheresourcesprovidedandtheidentityofservicelinemanagerandcountryofexpenditure.Discretefinancialinformationabouteachoftheseareasisreportedtotheexecutivemanagementteamonamonthlybasis.
Basedonthiscriteria,managementhasdeterminedthatthecompanyhasoneoperatingsegmentbeingmineralexplorationinMexico.As the company is focusedonmineral exploration, theBoardmonitors the companybasedon actual versus budgeted explorationexpenditureincurredbyareaofinterest.Theseareasofinterestmeetaggregatingcriteriaandareaggregatedintoonereportingsector.ThisinternalreportingframeworkisthemostrelevanttoassisttheBoardwithmakingdecisionsregardingthecompanyanditsongoingexplorationactivities,whilealsotakingintoconsiderationtheresultsofexplorationworkthathasbeenperformedtodate.
30 June 2011$
30 June 2010$
Revenuefromexternalsources - -
Reportablesegmentloss (2,837,268) (664,850)
Reportablesegmentassets 1,410,312 1,170,329
Reportablesegmentliabilities (415,662) (69,488)
Reconciliation of reportable segment loss
Reportablesegmentloss (2,837,268) (664,850)
Otherprofit 209,669 39,650
Unallocated:
-Salariesandwages (648,148) (473,619)
-Travelandaccommodation (209,491) (115,341)
-Officecosts (120,207) (97,953)
-Othercorporateexpenses (578,085) (343,026)
-Sharebasedpayments (245,835) (361,250)
-lossonassetsales - (1,873)
-Depreciation (32,440) (39,806)
Loss before tax (4,461,805) (2,058,068)
40
4. SEGMENT INFORMATION (CONT’D)
30 June 2011$
30 June 2010$
Reconciliation of reportable segment assets
Reportablesegmentassets 1,410,312 1,170,329
Unallocated:
-Cash 4,689,383 5,242,755
-Tradeandotherreceivables 879,826 153,391
-Investments 49,280 -
-Securitydeposits 45,378 22,308
-Officeplantandequipment 40,097 39,599
Total assets 7,114,276 6,628,382
Reconciliation of reportable segment liabilities
Reportablesegmentliabilities (415,662) (69,488)
Unallocated:
-Tradeandotherpayables (351,200) (250,035)
-Provisions (171,644) (140,934)
Total liabilities (938,506) (460,457)
5. REVENUE FROM CONTINUING OPERATIONS
2011$
2010$
Other revenues
Interest
Bankinterest 209,669 39,650
Total revenues from continuing operations 209,669 39,650
6. EXPENSES
Loss before income tax includes the following specific expenses
Depreciationofplantandequipment 32,440 39,806
Explorationexpenditure 3,982,806 1,536,522
Explorationexpenditurereimbursement (1,145,538) (871,672)
Operatingleaseexpenses 60,401 46,357
Superannuation 35,100 29,299
Notes to the Consolidated Financial Statements (cont’d)
41
7. INCOME TAX
2011$
2010$
(a) Income tax expense
Currenttax - -
Deferredtax - -
Adjustmentforcurrenttaxofpriorperiods - -
- -
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Lossfromcontinuingoperationsbeforeincometaxexpense (4,461,805) (2,058,068)
TaxattheAustraliantaxrateof30%(2010:30%) (1,338,542) (617,420)
Taxeffectofamountswhicharenotdeductible(taxable)incalculatingtaxableincome:
Share-basedpayments 73,751 108,375
Sundryitems 57,477 29,802
(1,207,314) (479,243)
Movementinunrecognisedtemporarydifferences (110,770) (97,756)
Taxeffectofcurrentyearforeigntaxlossesforwhichnodeferredtaxassethasbeenrecognised 1,046,138 152,630
Differenceinoverseastaxrates (20,923) (3,053)
Taxeffectofcurrentyeartaxlossesforwhichnodeferredtaxassethasbeenrecognised 292,869 427,422
Incometaxexpense - -
(c) Unrecognised temporary differences
DeferredTaxAssets(at30%)
On Income Tax Account
Capitalraisingcosts 68,556 108,758
Prepayments (3,737) (3,785)
Depreciationofplantandequipment (16,675) (18,713)
Provisions 57,493 49,780
Carryforwardtaxlosses 4,875,606 3,606,891
Carryforwardtaxlosses–foreign 2,745,174 1,719,959
Other–tenement 785,267 850,600
8,511,684 6,313,490
DeferredTaxLiabilities(at30%) - -
Deferredincometaxassetshavenotbeenrecognisedasitisnotprobablethatfutureprofitwillbeavailableagainstwhichdeductibletemporarydifferencescanbeutilised.
InadditiontotheaboveAustralianestimatedfutureincometaxbenefitstheconsolidatedentityhasincurredsignificantexpenditureinMexico,someofwhichshouldgiverisetotaxabledeductions.Atthisstagethecompanyisunabletoreliablyestimatethequantityofsuchfuturetaxbenefits.
Therearenofrankingcreditsavailable.
42
8. TRADE AND OTHER RECEIVABLES
2011$
2010$
Current
Prepayments 16,494 16,639
Sundryreceivables(a) 863,332 136,752
879,826 153,391
(a) Theseamountsgenerallyarisefromactivitiesoutsidetheusualoperatingactivities.Interestisnotusuallychargedandcollateral isnotobtained.FortheGroupthereceivableprincipallyarisesfromconsumptiontaxespaidtothirdpartysuppliersforwhich arefundfromtaxauthoritiesisexpected.
Therearenoimpairedsundryreceivablesandnopastduebutnotimpairedreceivables.
(b) Refertonote2forinformationontheriskmanagementpolicyoftheGroupandthecreditqualityoftheGroupsreceivables.
9. AVAILABLE FOR SALE INVESTMENTS
Listedsharesatfairvalue(a)
StoneshieldCapitalCorp. 49,280 -
(a) Available-for-saleinvestmentsconsistofinvestmentsinordinaryshares,andthereforehavenofixedmaturitydateorcoupon rate.StoneshieldCapitalCorp.islistedontheTorontoVentureExchange.Fairvaluehasbeendetermineddirectlybyreference topublishedquotationsonactivemarkets.
AtCost 40,944 -
Impairment - -
Fairvalueadjustmenttoreserve 8,336 -
Fairvalueat30June 49,280 -
Notes to the Consolidated Financial Statements (cont’d)
43
10. PLANT AND EQUIPMENT
Consolidated Furniture, fittings and equipment
$
Motor Vehicles
$
Exploration Equipment
$ Total
At 1 July 2009
Cost 317,094 70,382 46,929 434,405
AccumulatedDepreciation (238,622) (32,848) (19,537) (291,007)
NetBookAmount 78,472 37,534 27,392 143,398
Year ended 30 June 2010
Openingnetbookvalue 78,472 37,534 27,392 143,398
Additions 2,943 - - 2,943
Disposals (1,616) - (7,701) (9,317)
Depreciationondisposals 239 - 6,431 6,670
DepreciationCharge (21,511) (15,028) (3,268) (39,807)
Foreignexchangetranslationadjustment (922) (1,756) (315) (2,993)
Closingnetbookamount 57,605 20,750 22,539 100,894
At 30 June 2010
Cost 317,210 68,050 38,908 424,168
AccumulatedDepreciation (259,605) (47,300) (16,369) (323,274)
NetBookAmount 57,605 20,750 22,539 100,894
Year ended 30 June 2011
Openingnetbookvalue 57,605 20,750 22,539 100,894
Additions 55,274 - 2,849 58,123
Disposals - - - -
Depreciationondisposals - - - -
DepreciationCharge (22,796) (6,757) (2,887) (32,440)
Foreignexchangetranslationadjustment (3,160) (2,275) (2,544) (7,979)
Closingnetbookamount 86,923 11,718 19,957 118,598
At 30 June 2011
Cost 366,908 59,798 38,465 465,171
AccumulatedDepreciation (279,985) (48,080) (18,508) (346,573)
NetBookAmount 86,923 11,718 19,957 118,598
44
Notes to the Consolidated Financial Statements (cont’d)
11. CAPITALISED EXPLORATION EXPENDITURE (NON-CURRENT)
2011$
2010$
AtCost 1,331,811 1,109,034
ReconciliationsMovementinthecarryingamountsofcapitalisedexplorationexpenditurebetweenthebeginningandendofthecurrentfinancialyear
Openingnetbookamount 1,109,034 709,602
Additions 222,777 399,432
Disposals - -
Closingnetbookamount 1,331,811 1,109,034
Recoveryofthecapitalisedamountisdependentuponsuccessfuldevelopmentandcommercialexploitation,oralternatively,sale.
12. OTHER FINANCIAL ASSETS (NON-CURRENT)
SecurityDeposit 45,378 22,308
Thesefinancialassetsarecarriedatcost.
13. SUBSIDIARIES
Theconsolidatedfinancialstatements incorporatetheassets, liabilitiesandresultsofthe followingsubsidiaries inaccordancewiththeaccountingpolicydescribedinnote1(a):
Name Country of incorporation Class of shares Equity Holding*
2011%
2010%
AzureMexicoPtyLtd Australia Ordinary 100 100
MineraPiedraAzul,S.A.deC.V Mexico Ordinary 100 100
MineraCapitanaS.A.deC.V Mexico Ordinary 100 -
*Percentageofvotingpowerisinproportiontoownership
14. TRADE AND OTHER PAYABLES (CURRENT)
Tradepayables 766,861 319,523
InformationabouttheGroupsfinancialriskmanagementpoliciesisdisclosedinnote2.
45
15. PROVISIONS
2011$
2010$
CURRENT
Employeebenefits 56,948 35,758
Non-executivedirectorsretirementbenefits 77,011 -
133,959 35,758
NON-CURRENT
Employeebenefits 37,686 28,165
Non-executivedirectorsretirementbenefits - 77,011
37,686 105,176
16. CONTRIBUTED EQUITY
(a) Share capital
Consolidated
2011 2010
Number of shares $ Number of shares $
Ordinarysharesfullypaid 394,000,000 39,592,568 343,217,666 35,250,678
Totalconsolidatedcontributedequity 394,000,000 39,592,568 343,217,666 35,250,678
(b) Movements in ordinary share capital
2011 2010
Number of shares $ Number of shares $
1Julyopeningbalance 343,217,666 35,250,678 217,212,489 29,459,548
Issueat$0.09pershare 50,782,334 4,570,410 - -
Issueat$0.15pershare - - 100,005,177 5,000,258
Issueat$0.125pershare - - - -
Issueat$0.04pershare - - 26,000,000 1,040,000
Shareissueexpenses - (228,520) - (249,128)
30Juneclosingbalance 394,000,000 39,592,568 343,217,666 35,250,678
Fundsraisedfromthetwoshareissuesduringtheyearwereusedtoprogressthecompany’sexplorationinactivitiesandforgeneralworkingcapital.
46
16. CONTRIBUTED EQUITY (CONT’D)
(c) Movements in unlisted options on issue
Number of options
2011 2010
1JulyOpeningBalance 14,800,000 10,550,000
Issuedduringtheyear
-Exercisableat13.0cents,onorbefore30Nov2013 4,500,000 -
-Exercisableat8.8cents,onorbefore30Nov2012 - 12,500,000
Forfeitedduringtheyear
-Exercisableat25cents,onorbefore30Nov2008 (400,000) -
-Exercisableat17.5cents,onorbefore31Jan2011 (500,000) -
-Exercisableat15centsonorbefore30Nov2009 - (2,450,000)
-Exercisableat25cents,onorbefore30Nov2009 - (2,800,000)
-Exercisableat25cents,onorbefore30Nov2010 - (200,000)
-Exercisableat25cents,onorbefore30Jan2010 - (2,800,000)
30Juneclosingbalance 18,400,000 14,800,000
Furtherinformationonoptionsissuedissetoutinnote28.
(d) Ordinary shares
Ordinarysharesentitletheholdertoparticipate individendsandtheproceedsonwindingupofthecompany inproportiontothenumberofandamountspaidonthesharesheld.
Onashowofhandseveryholderofordinarysharespresentatameetinginpersonorbyproxy,isentitledtoonevote,anduponapolleachshareisentitledtoonevote.
Notes to the Consolidated Financial Statements (cont’d)
47
17. RESERVES AND ACCUMULATED LOSSES
2011$
2010$
Accumulated losses
Balanceatbeginningofyear 30,121,161 28,063,093
Lossfortheyear 4,461,805 2,058,068
Balanceatendofyear 34,582,966 30,121,161
Share-based payments reserve
Balanceatbeginningofyear 1,264,942 903,692
Movementduringtheyear 245,835 361,250
Balanceatendofyear 1,510,777 1,264,942
Available-for-sale assets reserve
Balanceatbeginningofyear - -
Revaluation 8,336 -
Balanceatendofyear 8,336 -
Foreign currency translation reserve
Balanceatbeginningofyear (226,534) (211,726)
Movementduringtheyear (126,411) (14,808)
Balanceatendofyear (352,945) (226,534)
(b) Nature and purpose of reserves
Share-based payments reserveTheshare-basedpaymentsreserveisusedtorecognisethefairvalueofoptionsissuedbutnotexercised.
Available-for-sale assets reserveThisreserverecordsfairvaluechangesonavailable-for-saleinvestments.Amountsarerecognisedinprofitandlosswhentheassociatedassetsaresoldorimpaired.
Foreign currency translation reserveTheforeigncurrencytranslationreserveisusedtorecordexchangedifferencesarisingfromthetranslationofthestatementsofforeignsubsidiaries.
18. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
Nodividendswerepaidordeclaredsincethestartofthefinancialyear.Norecommendationforpaymentofdividendshasbeenmade.
48
19. STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents
2011$
2010$
Cashandcashequivalentscomprises:
cashatbankandinhand 214,429 418,760
short-termdeposits 4,474,954 4,823,995
Closingcashandcashequivalentsbalance 4,689,383 5,242,755
Cashatbankandinhandearnsinterestatfloatingratesbasedondailybankdepositrates.
Short-termdepositsaremadeforvaryingperiodsofbetweenonedayandthreemonthsdependingontheimmediatecashrequirementsoftheGroup,andearninterestattherespectiveshort-termdepositrates.
(b) Reconciliation of the net loss after income tax to the net cash flows from operating activities
Netloss (4,461,805) (2,058,066)
Depreciationofnon-currentassets 32,440 37,659
Sharebasedpaymentexpense 245,835 361,250
Loss(Profit)onequipmentsales - 1,873
Foreignexchangedifferences (3,644) 3,111
Investments–noncash (40,944) -
Changes in operating assets and liabilities
(Increase)/decreaseintradeandotherreceivables (723,435) (26,051)
(Increase)/decreaseinprepayments 145 (452)
Increase/(decrease)intradeandotherpayables 523,671 109,648
Increase/(decrease)inprovisions 28,711 14,462
Netcashoutflowfromoperatingactivities (4,399,026) (1,556,566)
(c) Non-cash financing and investing activities
Therehavebeennonon-cashfinancingandinvestingactivitiesduringthe2011year(2010:Nil).
20. COMMITMENTS
(a) Exploration commitments
Thecompanyhascertaincommitmentstomeetminimumexpenditurerequirementsonthemineralexplorationassetsithasaninterestin.Outstandingexplorationcommitmentswhichareexpectedtobemetinthenormalcourseofbusinessareasfollows:
Notlaterthanoneyear 118,747 82,176
(b) Option payments
Thecompanyhasenteredintooptionagreementstoacquirea100%interestinthePromontorioprojectlocatedinthenorthernMexicanstateofChihuahuawithintherichlymineralisedSierraMadreOccidentalminingprovince. InordertoretaintherighttoacquirethePromontorioprojectoptionpaymentsmustbemadeasfollows:
Notlaterthanoneyear 3,000,966 373,696
Laterthanoneyearandnotlaterthanfiveyears - 3,713,604
3,000,966 4,087,300
Notes to the Consolidated Financial Statements (cont’d)
49
(c) Lease expenditure commitments
2011$
2010$
Operating leases (non cancellable):
Minimumleasepayments
notlaterthanoneyear 146,421 122,837
laterthanoneyearandnotlaterthanfiveyears 61,930 184,255
Aggregateleaseexpenditurecontractedforatreportingdate 208,351 307,092
Thepropertyleaseisanon-cancellableleasewithathree-yeartermending31December2012,rentispayablemonthlyinadvance.Theleaseallowsforsublettingofallleasedareasandexcessoffspacehasbeensub-lettherelatedthirdpartiesasdisclosedinNote25(d).
(d) Remuneration commitments
Amountsdisclosedasremunerationcommitmentsincludecommitmentsarisingfromtheservicecontractsofkeymanagementpersonnelreferredtoinnote25thatarenotrecognisedasliabilitiesandarenotincludedinthekeymanagementpersonnelcompensation.
Notlaterthanoneyear 480,120 413,765
laterthanoneyearandnotlaterthanfiveyears - -
480,120 413,765
21. CONTINGENCIES
Therearenomaterialcontingentliabilitiesorcontingentassetsofthecompanyatreportingdate.
22. EVENTS OCCURING AFTER BALANCE SHEET DATE
Nomatter or circumstance has arisen since the end of the financial year which significantly affected ormay significantly affect theoperationsofthegroup,theresultsofthoseoperations,orthestateofaffairsofthegroupinfuturefinancialyears
23. LOSS PER SHARE
(a) Reconciliation of earnings to profit or loss
Netloss (4,461,805) (2,058,068)
Lossusedincalculatingbasiclosspershare (4,461,805) (2,058,068)
(b) Weighted average number of ordinary shares outstanding during the year used in calculating basic loss per share
Consolidated
Number of shares2011
Number of shares2010
Weightedaveragenumberofordinarysharesusedincalculatingbasiclosspershare 359,680,071 238,152,785
(c) Effect of dilutive securities
Optionson issueat reportingdatecouldpotentiallydilutebasicearningspershare in the future.Theeffect in thecurrentyear is todecreasethelosspersharehencetheyareconsideredantidilutive.Accordinglydilutedlosspersharehasnotbeendisclosed.
50
24. AUDITORS’ REMUNERATION
Consolidated
2011$
2010$
AmountsreceivedordueandreceivablebyBDOAudit(WA)PtyLtdorassociatedentitiesfor :
Taxcomplianceservices 8,989 11,110
Other 325 592
Anauditorreviewofthefinancialreportoftheentity 35,435 37,018
44,749 48,720
Remunerationofotherauditorsofsubsidiaries
Auditorreviewoffinancialreportofsubsidiaries 10,201 7,813
25. KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Compensation of key management personnel by compensation
Consolidated
2011$
2010$
Short-term 543,120 447,375
Postemployment 35,100 37,240
Share-basedpayment 245,835 361,250
824,055 845,865
(b) Shares issued on exercise of compensation options
Therewerenosharesissuedonexerciseofcompensationoptionsduringtheyear.
(c) Option holdings of key management personnel
Vested at 30 June 2011
2011
Balance at beginning of
year 1 July 2010
Granted as Remuneration
Options Exercised
Options Lapsed
Balance at end of year
30 June 2011Vested &
Exercisable Unvested
Directors
WolfGerhardMartinick 2,800,000 500,000 - (400,000) 2,900,000 2,900,000 -
AnthonyPaulRovira 6,500,000 2,000,000 - (500,000) 8,000,000 8,000,000 -
JohnWalterSaleeba 2,000,000 500,000 - - 2,500,000 2,500,000 -
Executives
BrettDickson 3,500,000 1,500,000 - - 5,000,000 5,000,000 -
Total 14,800,000 4,500,000 - (900,000) 18,400,000 18,400,000 -
Notes to the Consolidated Financial Statements (cont’d)
51
Vested at 30 June 2010
2010
Balance at beginning of
year 1 July 2009
Granted as Remuneration
Options Exercised
Options Lapsed
Balance at end of year
30 June 2010Vested &
Exercisable Unvested
Directors
WolfGerhardMartinick 1,000,000 2,000,000 - (200,000) 2,800,000 2,800,000 -
AnthonyPaulRovira 5,500,000 5,000,000 - (4,000,000) 6,500,000 6,500,000 -
JohnWalterSaleeba 800,000 2,000,000 - (800,000) 2,000,000 2,000,000 -
Executives
BrettDickson 2,400,000 3,500,000 - (2,400,000) 3,500,000 3,500,000 -
Total 9,700,000 12,500,000 - (7,400,000) 14,800,000 14,800,000 -
(d) Shareholdings of key management personnel
Balance 1 July Granted
On Exercise of Options
Net Change Other
Balance 30 June
Balance Indirectly Held
2011
Ord Ord Ord Ord Ord Ord
Directors
WolfGMartinick 1,540,000 - - - 1,540,000 -
AnthonyPaulRovira 3,200,000 - - - 3,200,000 1,880,000
JohnWalterSaleeba 2,669,600 - - - 2,669,600 2,669,600
Executives
BrettDickson 112,000 - - - 112,000 40,000
Total 7,521,600 - - - 7,521,600 4,589,600
2010
Directors
WolfGMartinick 1,100,000 - - 440,000 1,540,000 -
AnthonyPaulRovira 2,982,000 - - 218,000 3,200,000 1,880,000
JohnWalterSaleeba 1,050,000 - - 1,619,600 2,669,600 2,669,600
Executives
BrettDickson 274,000 - - (162,000) 112,000 40,000
Total 5,406,000 - - 2,115,600 7,521,600 4,589,600
52
26. RELATED PARTY DISCLOSURES
(a) Parent entity
TheultimateparententitywithintheGroupisAzureMineralsLimited.
(b) Subsidiaries
Loans to subsidiaries
Parent Entity
2011$
2010$
Beginningoftheyear 6,167,053 8,850,744
Loansadvanced 3,772,742 1,953,157
LoansRepaid - -
Allowanceforimpairment - (4,636,848)
Endofyear 9,939,795 6,167,053
Itistheintentionofeachsubsidiarytorepayoutstandingloansthroughthesuccessfulexploitationorsaleofitsmineralassets.During2009marketconditionsdeterioratedwhichledtoareviewofthevalueofthemineralassetsheldbyMineraPiedraAzulS.A.deC.V.AsaresultofthatreviewtheParentEntitymadeanallowanceof$4,636,848againstloansadvancedtoitsMexicansubsidiaryMineraPiedraAzul,S.A.deC.V.
Nootherprovisionfordoubtfuldebtshavebeenraisedinrelationotheroutstandingbalances,andnootherexpensehasbeenrecognisedinrespectofbadordoubtfuldebtsduefromrelatedparties.
(c) Key management personnel
Disclosuresrelatingtokeymanagementpersonnelaresetoutinnote25.
(d) Other Related Transactions
TheCompanyhasentered intoa sub-leaseagreementonnormalcommercial termswithEzenetLimited,acompanyofwhichWolfMartinickisadirectorandBrettDicksonisCompanySecretary.DuringtheyearEzenetLimitedpaidsub-leasefeestotalling$4,800(2010:$4,800).
TheCompanyhasalsoenteredintoasub-leaseagreementonnormalcommercialtermswithRoxResourcesLimited,acompanyofwhichBrettDicksonisCompanySecretaryandDirector.DuringtheyearRoxResourcesLimitedpaidsub-leasefeestotalling$68,520(2010:$59,100).
27. INTERESTS IN JOINT VENTURES
Thecompanyhasinterestsinthefollowingjointventures:
Joint Venture Activities Interest Carrying Value $
(a) JOGMEC Copper 100% NIL
UnderthejointventureagreementJOGMECmayearna51%interestintheLaTortugaandLosNidosprojectsbyspendingUS$3millionby31March2012.At30June2011JOGMEChadspendapproximatelyUS$1,858,753(2010:US$1,266,982).
(b) OZMinerals Copper 100% NIL
During2010theGroupenteredintoajointventurewithOZMineralsLimited(OZMinerals)coveringtheSanEduardoprojectsPursuantto theagreementOZMineralscouldearna51% interest in theprojectsby spendingUS$3million.OZMineralscould thenearnafurther19%interestbyspendingafurtherUS$10million.At30June2011OZMineralswithdrewfromthejointventureafterspendingapproximatelyUS$699,913.
(c) JOGMEC Copper 100% NIL
TheGrouphasenteredintoajointventurewithJOGMECcoveringtheElTecoloteproject.PursuanttotheagreementJOGMECmayearna51%interestintheprojectbyspendingUS$5million.JOGMECmayearnafurther19%interestbyspendingafurtherUS$8million.At30June2011JOGMEChadspentapproximatelyUS$341,387.
Notes to the Consolidated Financial Statements (cont’d)
53
28. SHARE-BASED PAYMENTS
ThegrouphasissuedoptionspursuanttoanEmployeeShareplanandalsoDirectorOptionsIssuedpursuanttoapprovalobtainedbyshareholdersataGeneralMeeting.Detailsofeachissueissetoutbelow:
(a) Employee and consultants option plan
The establishment of theAzure Minerals Limited – Employees and Contractors Option Incentive Plan (“Plan”) was approved byshareholders at the 2004AnnualGeneralMeeting.The plan is designed to provide long-term incentives for employees and certaincontractorstodeliverlongtermshareholderreturns.ParticipationintheplanisattheBoardsdiscretionandnoindividualhasacontractualrighttoparticipateintheplanortoreceiveguaranteedbenefits.Inaddition,underthePlan,theBoarddeterminesthetermsoftheoptionsincludingexerciseprice,expirydateandvestingconditions,ifany.
Optionsgrantedundertheplancarrynodividendorvotingrights.Whenexercised,eachoptionisconvertibleintoanordinaryshareofthecompanywithfulldividendandvotingrights.
Setoutbelowaresummariesofoptionsgrantedundertheplan.
2011
Grant Date Expiry Date
ExercisePrice
(cents)
Value per option at grant date
(cents)
Balance of the start of the
yearNumber
Granted during
the yearNumber
Exercisedduring the
yearNumber
Lapsedduring the
yearNumber
Balance atend of
the yearNumber
Vested andexercisable at
end of the yearNumber
6Dec‘06 31Jan‘11 17.5 3.74 500,000 - - (500,000) - -
6Dec‘06 31Jan‘12 25.0 3.64 500,000 - - 500,000 500,000
6Dec‘06 31Jan‘13 35.0 3.45 500,000 - - 500,000 500,000
1,500,000 - - (500,000) 1,000,000 1,000,000
Weightedaverageexerciseprice $0.258 $0.175 $0.30 $0.30
2010
6Dec‘06 31Jan‘11 17.5 3.74 500,000 - - - 500,000 500,000
6Dec‘06 31Jan‘12 25.0 3.64 500,000 - - - 500,000 500,000
6Dec‘06 31Jan‘13 35.0 3.45 500,000 - - - 500,000 500,000
6Dec‘06 30Nov‘09 15.0 0.93 1,200,000 - - 1,200,000 - -
3Aug‘07 30Nov‘09 15.0 14.3 1,250,000 - - 1,250,000 - -
3,950,000 - - 2,450,000 1,500,000 1,500,000
Weightedaverageexerciseprice $0.191 $0.150 $0.258 $0.258
Nooptionswereexercisedduringtheperiodscoveredbytheabovetables.Duringtheyear500,000lapsed(2010:2,400,000).Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheendoftheperiodwas1.09years(2010:1.59years).Fairvalueofoptionsgranted.Optionsaregrantedfornoconsideration.NooptionsweregrantedpursuanttothePlanduringthe2011or2010financialyears.
54
28. SHARE-BASED PAYMENTS (CONT’D)
(b) Directors and executive options
SetoutbelowaresummariesofDirectorsoptionsgranted.
2011
Grant Date Expiry Date
ExercisePrice
(cents)
Value per option at grant date
(cents)
Balance of the start of the
yearNumber
Granted during
the yearNumber
Exercisedduring the
yearNumber
Lapsedduring the
yearNumber
Balance atend of
the yearNumber
Vested andexercisable at
end of the yearNumber
24Dec‘07 31Jan‘11 25.0 10.2 400,000 - - (400,000)
- -
24Dec‘07 31Jan‘12 25.0 11.7 400,000 - - - 400,000 400,000
9Dec‘09 30Nov‘12 8.8 2.9 12,500,000 - - - 12,500,000 12,500,000
14Dec‘10 30Nov‘13 13.0 5.5 - 4,500,000 - - 4,500,000 4,500,000
13,300,000 4,500,000 - (400,000) 17,400,000 17,400,000
Weightedaverageexerciseprice $0.10 $0.13 - $0.25 $0.10 $0.10
2010
30Nov‘03 30Nov‘09 25.0 - 2,800,000 - - 2,800,000 - -
30Nov‘03 30Nov‘10 25.0 - 2,800,000 - - 2,800,000 - -
24Dec‘07 31Jan‘10 25.0 8.2 200,000 - - 200,000 - -
24Dec‘07 31Jan‘11 25.0 10.2 400,000 - - - 400,000 400,000
24Dec‘07 31Jan‘12 25.0 11.7 400,000 - - - 400,000 400,000
9Dec‘09 30Nov‘12 8.8 2.9 - 12,500,000 - - 12,500,000 12,500,000
6,600,000 12,500,000 - 5,800,000 13,300,000 13,300,000
Weightedaverageexerciseprice $0.25 - $0.25 $0.088 - $0.25
Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheendoftheperiodwas1.6years(2010:2.3years).
Fair value of director options granted.
Optionsaregrantedfornoconsideration.Duringthe2011financialyeartheweightedaveragefairvalueoftheoptionsgrantedwas5.5cents(2010:2.9cents).ThepricewascalculatedbyusingtheBinominalOptionvaluationmethodologyapplyingthefollowinginputs:
2011 2010
Weightedaverageexerciseprice 13.0 cents 8.8cents
Weightedaveragelifeoftheoption 3 years 3years
Weightedaverageunderlyingshareprice 8.6 cents 5.0cents
Expectedsharepricevolatility 115% 110%
Riskfreeinterestrate 5.25% 4.83%
Historicalvolatilityhasbeenthebasisfordeterminingexpectedsharepricevolatilityasitassumedthatthisisindicativeoffuturetrends,whichmaynoteventuate.Thelifeoftheoptionsisbasedonhistoricalexercisepatterns,whichmaynoteventuateinthefuture.Totalexpensesarisingfromshare-basedpaymenttransactionsrecognisedduringtheperiodwereasfollows:
Consolidated
2011$
2010$
Optionsissuedtodirectorsandexecutives 245,835 361,250
Notes to the Consolidated Financial Statements (cont’d)
55
29. PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
Theindividualfinancialstatementsfortheparententityshowthefollowingaggregateamounts:
2011$
2010$
Statement of Financial Position
Currentassets 14,959,150 5,396,146
Totalassets 15,094,796 6,628,382
Currentliabilities 487,159 355,281
Totalliabilities 522,845 460,457
Shareholder’s equity
Issuedcapital 39,592,568 35,250,678
Reserves
Share-basedpayments 1,519,113 1,264,942
Accumulatedloses (26,539,730) (25,565,048)
14,571,951 10,950,572
(b) Contingent liabilities of the parent entity
Theparententitydidnothaveanycontingentliabilitiesasat30June2011or30June2010.
(c) Contracted commitments for the acquisition of property, plants or equipment
Theparententitydidnothaveanycommitmentsfortheacquisitionofproperty,plantsorequipment.
56
Thedirectorsofthecompanydeclarethat:
(1) ThefinancialstatementsandnotesoftheconsolidatedentityareinaccordancewiththeCorporationsAct2001,including:
(a)complyingwithAccountingStandardsandtheCorporationsRegulations2001;and
(b)givingatrueandfairviewoftheconsolidatedentity’sasat30June2011andofitsperformancefortheyearendedonthatdate.
(2) Inthedirectors’opinion,therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.
(3) Thedirectorshavebeengiventhedeclarationbythechiefexecutiveofficerandchieffinancialofficerasrequiredbysection295AoftheCorporationsAct2001.
(4) TheCompany has included in the notes to the financial statements an explicit and unreserved statement of compliancewithInternationalFinancialReportingStandards.
ThisdeclarationismadeinaccordancewitharesolutionoftheBoardofDirectorsandissignedforandonbehalfofthedirectorsby:
Anthony Paul Rovira ExecutiveChairman
Perth,23September2011
Directors’ Declaration
Azure Minerals Limited – 2011 Annual Report
18
Directors' ReportProceedings on behalf of the companyNo person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of thecompany for all or part of those proceedings.
No Proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001
NON-AUDIT SERVICESThe Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the Group are important.Details of the amount paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for audit and non-audit services provided during the year are set out below.The Board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provisions of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:• All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of
the auditor• None of the services underline the general principals relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-audit firms:
Consolidated
1. Audit Services
2011
$
2010
$
BDO Audit (WA) Pty Ltd 35,435 37,018Audit and review of financial reports
2. Non audit ServicesAudit-related servicesBDO Audit (WA) Pty Ltd
Attendance at Annual General Meeting 325 542
Taxation ServicesBDO Audit (WA) Pty Ltd
Tax compliance services
8,989 11,110Total remuneration for non-audit services 9,314 11,652
AUDITOR INDEPENDENCE A copy of the auditor’s independence declaration as required under section 307c of the Corporations Act 2001 is set out on page 53. 11,652
AUDITORBDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the directors.
Anthony Paul Rovira Executive ChairmanPerth, 23 September 2011
57
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
Tel: +8 6382 4600Fax: +8 6382 4601 www.bdo.com.au
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AZURE MINERALS LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Azure Minerals Limited, which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,which has been given to the directors of Azure Minerals Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
Tel: +8 6382 4600Fax: +8 6382 4601 www.bdo.com.au
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AZURE MINERALS LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Azure Minerals Limited, which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,which has been given to the directors of Azure Minerals Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
Tel: +8 6382 4600Fax: +8 6382 4601 www.bdo.com.au
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AZURE MINERALS LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Azure Minerals Limited, which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,which has been given to the directors of Azure Minerals Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.
58
Opinion
(a) the financial report of Azure Minerals Limited is in accordance with the Corporations Act 2001,including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June
2011 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and(b) the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1.
Material Uncertainty Regarding Continuation as a Going Concern
Without qualifying our opinion, we draw attention to note 1 in the financial report which indicates that the company incurred a net loss of $4,461,805 for the year ended 30 June 2011, and, as at that date, the company experienced net cash outflows from operating activities of $4,399,026. These conditions along with other matters as set forth in note 1 of the financial report indicate the existence of a material uncertainty which may cast significant doubt on the entity’s ability to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2011. 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.
Opinion
In our opinion, the Remuneration Report of Azure Minerals Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
Glyn O’BrienDirector
Perth, Western Australia Dated this 23rd day of September 2011
59
Tel: +8 6382 4600Fax: +8 6382 4601 www.bdo.com.au
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
23 September 2011
Board of Directors Azure Minerals Limited Level 1, 30 Richardson Street WEST PERTH WA 6005
Dear Sirs,
DECLARATION OF INDEPENDENCE BY GLYN O’BRIEN TO THE DIRECTORS OF AZURE MINERALS LIMITED
As lead auditor of Azure Minerals Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Azure Minerals Limited and the entities it controlled during the period.
Glyn O’Brien Director
BDO Audit (WA) Pty Ltd Perth, Western Australia
Tel: +8 6382 4600Fax: +8 6382 4601 www.bdo.com.au
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
23 September 2011
Board of Directors Azure Minerals Limited Level 1, 30 Richardson Street WEST PERTH WA 6005
Dear Sirs,
DECLARATION OF INDEPENDENCE BY GLYN O’BRIEN TO THE DIRECTORS OF AZURE MINERALS LIMITED
As lead auditor of Azure Minerals Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Azure Minerals Limited and the entities it controlled during the period.
Glyn O’Brien Director
BDO Audit (WA) Pty Ltd Perth, Western Australia
60
Thenumberofshareholders,bysizeofholding,ineachclassofshareasat12September2011are:
Ordinary shares
Number of holders Number of shares
1 - 1,000 136 12,295
1,001 - 5,000 204 759,288
5,001 - 10,000 693 6,167,168
10,001 - 100,000 1842 79,309,201
100,001 andover 588 307,752,048
3,463 394,000,000
Thenumberofshareholdersholdinglessthanamarketableparcelofsharesare: 644 3,053,941
(b) Twenty largest shareholders
Thenamesofthetwentylargestholdersofquotedsharesare:
Listed ordinary shares
Number of sharesPercentage of
ordinary shares
1 YandalInvestmentsPtyLtd 29,152,200 7.40
2 HSBCCustodyNominees<Australia> 20,376,928 5.17
3 TempoCapitalPtyLtd 16,396,920 4.16
4 CiticorpNomineesPtyLimited 6,422,055 1.63
5 ASIPACGroupPtyLtd 5,555,555 1.41
6 InternationalCommodityFinanceLimited 5,555,555 1.41
7 AlchemySecuritiesPtyLtd 5,526,785 1.40
8 JPMorganNomineesAustraliaLimited<CashIncomeA/C> 4,988,763 1.27
9 MrThomasFritzEnsmann 4,160,816 1.06
10 InvestecBank(Australia)Ltd 3,100,000 0.79
11 FleurbowPtyLtd 3,087,500 0.78
12 MrKevinChan+MissRenataHiuFongJian 3,036,694 0.77
13 NovacartaPtyLtd 2,912,500 0.74
14 PoluruPtyLtd<KentSuperfundA/C> 2,900,000 0.74
15 MrPeterMurrayNicholas 2,700,000 0.69
16 DrLyndsayGeorgeMcDonaldGordon 2,501,833 0.63
17 MrPhillipWood 2,400,000 0.61
18 ForsythBarrCustodiansLtd<NomineeA/C> 2,237,058 0.57
19 StadjoyPtyLtd 2,038,400 0.52
20 MrDavidAlistairCadwallader 2,011,200 0.51
127,060,762 32.26
(c) Substantial shareholders
ThenamesofsubstantialshareholderswhohavenotifiedtheCompanyinaccordancewithsection671BoftheCorporationsAct2001are:
Number of shares
YandalInvestmentsPtyLtd 29,152,200
asx additional information
61
(d) Voting rights
Allordinaryshares(whetherfullypaidornot)carryonevotepersharewithoutrestriction..
(e) Schedule of interests in mining tenements
Common Name Tenement Percentage held / earning
ElLlanodelNogal LlanodelNogal-Fraccion1 AllMinerals 224717 100%
LlanodelNogal-Fraccion2 AllMinerals 224718 100%
LlanodelNogal-Fraccion3 AllMinerals 224719 100%
LlanodelNogal2 AllMinerals 230186 100%
LlanodelNogal3 AllMinerals 232390 100%
Tabisco Tabisco-Fraccion2 AllMinerals 220663 100%
Tabisco2-Fraccion1 AllMinerals 229008 100%
Tabisco2-Fraccion2 AllMinerals 229009 100%
PozodeNacho PozodeNacho AllMinerals 222873 100%
PozodeNacho2-Fracc.1 AllMinerals 225057 100%
PozodeNacho2-Fracc.2 AllMinerals 225058 100%
PozodeNacho3 AllMinerals 228563 100%
EstacionLlano EstacionLlano AllMinerals 227017 100%
LosChinos LosChinos AllMinerals 231815 100%
LaTortuga LaTortuga AllMinerals 230422 100%
LaTortugaII AllMinerals 233462 100%
LosNidos LosNidos AllMinerals 231051 100%
LosNidosII AllMinerals 234294 100%
ElTecolote ElTecolote AllMinerals 230771 100%
ElTecoloteII AllMinerals 236795 100%
ElTecolteIII AllMinerals 234586 100%
SanJuan SanJuan AllMinerals 222952 100%
SanJuanII AllMinerals 222952 100%
SanEduardo SanEduardo AllMinerals 232387 100%
SanEduardo2Frac1 AllMinerals 236796 100%
SanEduardo2Frac2 AllMinerals 236797 100%
SanEduardo2Frac3 AllMinerals 236798 100%
Promontorio Hidalgo AllMinerals 235270 100%*
Promontorio AllMinerals 235269 100%*
ElMagistral AllMinerals 218881 100%*
PromontorioRegional AllMinerals 234447 100%
*optiontoacquire100%
62
NOTES
63
NOTES
64
NOTES
Level 1, 30 Richardson StreetWEST PERTH WA 6005
PH: (08) 9481 2555
W W W. A Z U R E M I N E R A L S . C O M . AU