GOLD CORPORATION Gold Corporation
Annual Report 2 0 0 5 ~ 2 0 0 6
Contents
Statement of Compliance 3 Gold Corporation – More than a Century in Precious Metals 5 Mission Statement 7 Activities 8 • Precious Metal Investment Products 9 • Commemorative and Numismatic Coins 10 • Precious Metal Coin Blanks 11 • Tourism 12 • Gold Refining 13 Group Structure 14 The Year in Brief 15 Chairman’s Review 16 Review of Operations 19 Corporate Governance 27 Group Directory 34 Corporate Directory 35 Statutory Reporting Requirements 36 Senior Management 39 Auditor General’s Opinion 40 Performance Indicators 42 Certification of Performance Indicators 45 Certification of Financial Statements 46 Financial Statements 47
Statement of Compliance
19 September 2006
The Hon E S Ripper BA DipEd MLA Deputy Premier; Treasurer; Minister for Government Enterprises; Minister Assisting the Minister for Public Sector Management 28th Floor, Governor Stirling House 197 St George’s Terrace PERTH WA 6000
STATEMENT OF COMPLIANCE
In accordance with the Financial Administration and Audit Act 1985, we hereby submit for your information and for presentation to Parliament, the Annual Report of Gold Corporation for the year ended 30 June 2006.
The Report has been prepared in accordance with the provisions of the Financial Administration and Audit Act 1985.
P J UNSWORTH M E HARBUZ Chairman Executive Director
Gold Corporation – more than a century in precious metals
The history of Gold Corporation started with the founding of the Perth branch of Britain’s Royal Mint in 1899. At that time, gold sovereigns and half sovereigns were used throughout the British Empire as everyday circulating coins and it was the Royal Mint’s responsibility to supply them. Rather than shipping gold to London, minting sovereigns and then distributing them back to Britain’s colonies, the Royal Mint built a number of branch mints throughout the Empire in places where gold was found. The Perth Mint was one of these –built to refine gold mined in Western Australia and turn it into sovereigns.
When sovereigns were withdrawn from circulation in The Mint’s refining activities eventually outgrew the 1931, the Mint turned its skills to the production of base old premises in the city of Perth and a new refinery metal coins, although it still continued to refine gold. It was built in Newburn, near Perth’s international remained under British ownership until 1970, when airport. This facility commenced operation in 1990. control passed to the Western Australian Government. The Corporation has two wholly owned subsidiaries Gold Corporation was created by the Gold Corporation – the Western Australian Mint and GoldCorp Act 1987 to take over the operations of the Mint and Australia. The refining and associated activities are launch Australia’s bullion coin program. The Australian now carried out by AGR Matthey, in which Gold Nugget bullion coin was launched in 1987, and was Corporation has a 40% interest. followed by many other successful bullion coin programs and numismatic and commemorative coins.
Mission Statement
Gold Corporation develops and supplies precious Gold Corporation commits to: metal related products and services, including: • supplying products, services and experiences • Australian legal tender investment coins and which delight customers and users; bars, which promote the ownership of precious • promoting the history and heritage of Australia metal for investment purposes; locally and internationally through its coins; • precious metal depository products which enable • preserving its heritage assets and history for the investors to invest in precious metals without benefit of the community; having to deal with the security and other issues • providing fulfilment, development, security and associated with the keeping of physical metal; reward to its employees; • proof, numismatic and commemorative coins • generating an acceptable financial return for its which are legal tender of Australia and other shareholder, the Western Australian countries; Government; and • storage and safekeeping for precious metals; • paying a fair royalty to Australian Treasury on • coin blanks and other precious metal products. Australian legal tender coins issued.
It also operates a tourist attraction based on the It is committed to promoting high ethical standards, themes of gold, coins and their history at The Perth respect for people and the environment, and Mint. Through the AGR Matthey partnership, enlightened business practices. refining, assaying and other services are supplied to the gold industry. These enhance the value added and export income derived from gold production.
Activities Precious Metal Investment Products
Bullion Coins and Bars Perth Mint Depository Services Gold Corporation, the operator of The Perth Mint, Perth Mint Depository Services (PMDS) offers a provides a range of precious metal products offering range of precious metal purchase, storage and customers a number of ways in which their assets trading facilities on internationally competitive can be directly exposed to the value of gold, silver terms to both national and international investors. and platinum. The service is promoted principally via the internet (www.perthmint.com.au/depository). The minimum The Corporation is the producer of Australia’s official investment is US$50,000 for international clients investment or bullion coins. These include the and $50,000 for Australian residents. renowned Australian Nugget Gold Coin Series, the Australian Kookaburra Silver Coin Series, the Perth Mint Certificate Program Australian Koala Platinum Coin Series, and the The Perth Mint Certificate Program (PMCP) offers Australian Lunar Gold and Silver Coin Series. precious metal investments via an international Together with a popular range of minted gold bars, network of approved dealers. Under the program, The Perth Mint’s bullion coins are distributed investors receive a certificate confirming their through an international network of authorised acquisition of precious metal stored at The Perth agents, banks and dealers. Mint. The minimum investment is US$10,000 for USA domiciled investors, with varying minimum Perth Mint Depository amounts for other regions. Perth Mint Depository provides investors with the opportunity of investing in precious metals without Perth Mint Gold having to deal with the issues related to taking For investors who prefer the convenience of trading physical possession. It has three products: Perth on the Australian Stock Exchange, Perth Mint Gold Mint Depository Services, the Perth Mint Certificate (ASX code: ZAUWBA) is structured as a warrant and Program and the Australian Stock Exchange listed enables both large and small investors to have an product, Perth Mint Gold. exposure to gold in their portfolios.
Commemorative and Numismatic Coins
With designs that change annually, gold, silver and techniques have also led to the introduction of platinum investment coins produced by The Perth unusual shaped coins, locket coins that encapsulate Mint are often collected for their beauty, rather than free-moving objects, and lenticular coins featuring purchased for their precious metal content alone. moving images.
The Perth Mint caters for the collector sector of the Many of these collector and commemorative issues market with a specific range of numismatic releases celebrate the uniqueness of the Australian characterised by outstanding proof quality, strictly continent, as well as the heritage, history and limited mintages, and luxury presentation packaging. culture of the Australian people. The coins are not only sold successfully in Australia, but also While the number of traditional numismatists is throughout the world, using the Mint’s international declining, a more diversified market for collectable marketing network. coins is developing throughout the world. This has become a large business, but one in which the Increasingly, The Perth Mint is also producing coins demands for quality and innovation are ever for issue as legal tender of other nations. For increasing. The Perth Mint, long acclaimed for its example, the Mint has an exclusive arrangement with high quality coins, is also at the forefront of Tuvalu, under which it is the sole developing innovative treatments and manager of the South Pacific finishes aimed at attracting collectors. nation’s collector coin program. It also mints collector coins As a result, it has successfully issued under the authority of expanded the market with the Government of New numismatic releases featuring the Zealand, the Cook Islands application of colour and 24-carat and other countries. gilding. Its advanced manufacturing
10 Precious Metal Coin Blanks
The basis of a high quality coin is a skilfully produced blank. The Perth Mint’s unrivalled expertise and world- class manufacturing technology gives it the capability to produce gold, silver, platinum and palladium blanks (fine and alloyed) in a wide range of sizes and an almost limitless number of shapes. Precious metal blanks produced by The Perth Mint are increasingly sought by international clients, including several prestigious overseas mints.
11 Tourism
A visit to The Perth Mint has become an essential element of any tourist’s visit to Western Australia. Offering a unique array of attractions, including a spectacular Gold Pour and the chance to handle a pure gold bar, the Mint’s exhibition and shopping facilities attract many thousands of international, interstate and local visitors each year.
The importance of gold in the development of Western Australia is apparent in the Mint’s grand limestone building, which opened in 1899. Steeped in history, its exhibitions and displays of historic artefacts are set up to tell the story of over 100 years of Western Australian gold production. The face of modern minting is also accessible to visitors through viewing windows revealing coin presses being used to mint millions of dollars of precious metal coins.
The elegantly appointed Shop not only stocks the organisation’s own precious metal coins and bars, but also a huge range of jewellery, natural gold nuggets, gifts and souvenirs. The genteel surroundings of the new Tea Garden have secured a delightful refreshment stop at the Mint on the itinerary of many tours.
12 Gold Refining
Gold Corporation has a 40% interest in the AGR AGR Matthey is responsible for exporting most of the Matthey partnership, Australia’s only major gold gold that it refines, largely in the form of value added refiner. The other two partners are subsidiaries of products, it is one of Western Australia’s major Newmont Mining Corporation (40%), a USA based exporters. international gold producer, and Johnson Matthey AGR Matthey also operates a business based in plc (20%), a major UK company in the business of Melbourne, which manufactures and distributes precious metals, catalysts and chemicals. precious metal industrial products and jewellery, The refinery in Perth refines virtually all of both finished and unfinished, and fabricated plate, Australia’s gold, gold from Pacific countries and wire and sheet for the jewellery manufacturing recycled gold mainly from Asia. It is one of the industry. largest gold refineries in the world and also refines significant quantities of silver.
13 Group Structure
Holding Company Gold Corporation
100% 100%
Subsidiaries GoldCorp Australia Western Australian Mint
Trading Names The Perth Mint Westmill Perth Mint Depository
40%
Joint Ventures AGR Matthey
40% 20%
100% Australian Gold Johnson Matthey Joint Venture Newmont Australia Ltd Partners Alliance Pty Ltd (Aust) Ltd
Activities
Manufacturing and Gold and silver Retail marketing of investment refining, manufacture Tourism Precious metal and numismatic coins, and marketing of value Precious metal linked Exhibition blank manufacture other minted items and added bullion bars, precious investment products related products metal industrial products and jewellery
AGR Matthey
AGR Management Services Pty Ltd Analytical Platinum Supplies Pty Ltd Metals Refining Operations Ltd Alloy & Gold Supply (NSW) Pty Ltd AGR Hong Kong AGR Matthey (New Zealand) Ltd
14 The Year in Brief
» Gold Corporation made a profit before tax of $7.3 million. » The three year “Discover Australia” coin program was launched to international acclaim. » Gold Corporation was awarded the contract to mint and issue the Qatar legal tender official coins and the winners’ medals for the 2006 Asian Games. » Precious metal prices rose dramatically affording some exciting business opportunities. » Australian bullion coins increased their worldwide market share substantially. » The value of metals on deposit increased to almost $900 million. » In excess of 130,000 people visited The Perth Mint. » The number of precious metal coin blanks supplied to other mints increased significantly. Chairman’s Review
It was an exciting year for Gold Corporation with promotes Australia’s attractions around the world volatility in precious metals markets and strong and is proving to be very popular. There were other performances from all its businesses. Profit before successful themes on Australian, Tuvalu and Cook tax was $7.3 million compared to the previous Islands legal tender coins. The contract for minting year’s $2.2 million. the Qatar legal tender official commemorative coins for the 2006 Asian Games has resulted in some Precious metal prices increased significantly, with the unique coin designs and market opportunities. gold price going as high as US$726 and the silver price US$14.94. At times, precious metal price volatility The growing precious metal coin blank business has created uncertainty in the markets, although they had resulted in Gold Corporation being an important settled somewhat by the end of the financial year. The supplier to other mints around the world and is number of investors seeking security or opportunity in enhancing export revenue. With 76% of its $933 precious metals rose and most precious metal million turnover from exports, the Corporation is investment products around the world experienced an important exporter in Western Australia and was inflows of funds. The number of Perth Mint Depository pleased to win the Large Advanced Manufacturer clients grew significantly and the value of metal held category in the WA Industry and Export Awards in on their behalf increased to almost $900 million by the October 2005. At the same time, the Corporation also end of the financial year. Demand for bullion coins also won the Marketing and Design Excellence category. improved and it is pleasing to report that Gold At a time when the tourism industry seems to be Corporation increased its world market share. facing a number of challenges, it is pleasing to However, the high metal prices made numismatic report an increase in the number of visitors to The coins seem less attractive to collectors. Perth Mint. In excess of 130,000 people visited the Two launch functions were held for the new Mint and there are plans to enhance the exhibition “Discover Australia” three year coin program – one even further, and to continue to allocate resources to in Brisbane and the other at the world’s premier the preservation of Gold Corporation’s important annual coin event in Berlin. This coin series heritage assets.
16 The Corporation has many business partners in This has been a particularly busy year for Gold Australia and overseas including agents, distributors Corporation. The factory was extremely busy and and dealers. Many of these are long standing worked extended hours or on double shift for most of relationships and our thanks go to all of them for a the year. Staff dealing with Depository clients had to job well done. Gold Corporation’s products are sold deal with more than a doubling of their workload over all over the world and it is well known in the an extended period of time and every department in industries in which it operates. This would not be the organisation was under pressure. The possible without its competent and dedicated management and staff of Gold Corporation rose to business partners. the challenges and, on behalf of the Board, I would like to thank them for their efforts and contributions. Gold Corporation has a 40% interest in the AGR Matthey partnership, the refiner of almost all of Australia’s gold and one of the largest gold refineries in the world. The rising gold price resulted in a large quantity of secondary gold being received for refining and, as usual the organisation met the P J UNSWORTH challenge. It made a significant contribution to the Chairman profit of Gold Corporation in the financial year.
I would like to thank my fellow directors for their efforts and contributions throughout the year. Also, I would like to thank the Minister responsible for Gold Corporation, the Hon Eric Ripper MLA, Deputy Premier, Treasurer, Minister for Government Enterprises and Minister Assisting the Minister for Public Sector Management for finding some time in his busy schedule to devote to Gold Corporation.
17
Review of Operations
FINANCIAL SUMMARY BUSINESS ACTIVITIES
It was an extremely busy year with excellent results Coins from Gold Corporation’s business activities. Total Gold Corporation is the official producer of sales revenue grew by 136% from $396 million to Australia’s legal tender gold, silver and platinum $933 million, reflecting both substantially increased bullion coins. It also mints and markets Australian business activity and the significant increase in collector and numismatic issues, and produces precious metal prices. A profit before tax of $7.3 coins on behalf of overseas issuing authorities. million for the 2005/2006 financial year compares with a profit of $2.2 million in the previous year. Australian legal tender coins made by The Perth Mint are produced under an agreement with the Payments to the Western Australian Government as Australian Treasury, which receives a royalty or a result of the performance of Gold Corporation in ‘seignorage’ on each coin sold. 2005/2006 will include income tax equivalent of $2.5 million and a dividend of $2.9 million. Almost 80% of the Mint’s finished precious metal products, including minted bars and medallions, The royalty payment to the Australian Treasury were exported. Distribution is achieved through the under the terms of the agreement entitling Gold Mint’s international marketing network, comprising Corporation to issue Australian legal tender coins banks, direct marketing companies and coin will be $1.5 million for the year. distributors. During the year, this network was These contributions will bring to over $51 million successful in traditional markets such as Europe, the totals made to the State and Federal North America and Japan, and many emerging Governments by Gold Corporation since its markets, notably China, the Middle East, Russia inception in 1988. and Ukraine.
In its ongoing program to update its equipment facilities During 2005/2006, Gold Corporation sold over one and information systems, the organisation’s capital million coins. Interest in bullion coins was expenditure for the financial year was $2.2 million. stimulated by the movement in metal prices, which increased demand for gold as an investment.
19 Despite formidable competition from the United The official launch of the Discover Australia coin States Eagle, the Canadian Maple Leaf, The program in Brisbane on 24 January 2006 attracted Austrian Philharmoniker and others, Australian strong attendance from collectors, dealers, media Nugget and Australian Lunar gold bullion coins and specially invited guests. Footage of the launch performed strongly. According to statistics event was used to great effect at the international published in the industry, their share of the world launch function at the Berlin World Money Fair in market rose to 17% in the first quarter of 2006 – February 2006 – the world’s premier coin event. the highest for many years. Both launch events generated considerable interest in the coins, resulting in strong sales. However, rising precious metal prices proved to be a mixed blessing. Interest in both gold and silver Another exciting highlight was the official numismatic coins declined as they were perceived commemorative coin program for the 15th Asian to be too expensive in some markets. Games Doha 2006. Won by The Perth Mint ahead of 18 other minting organisations from around the Even so, the Corporation successfully launched a world, the prestigious program comprises proof major new collector coin program to replace the gold and proof silver coins, as well as uncirculated annual Proof Issues of its Australian Nugget, bronze releases, which are issued as legal tender of Kookaburra and Koala Coin Series. Discover the State of Qatar. Australia is a magnificent three-year program comprising proof quality pure gold coins, pure silver Offering Asia-based dealers a commemorative coins and pure platinum coins. Issued by The Perth theme that is directly relevant to their market, the Mint as Australian legal tender, the coins portray program provided a superb platform on which to the nation’s most exciting places, its unique animals build further recognition for The Perth Mint’s and its beautiful wild flowers. trusted brand throughout the region.
Examples of other successful themes appearing on coins issued during the year were: • Her Majesty Queen Elizabeth’s 80th Birthday • The 40th anniversary of Australian decimalisation • The 400th anniversary of recorded European contact with Australia • The 2006 Australia-Japan Year of Exchange
Each of these examples were struck by The Perth Mint from 99.9% pure silver and issued as Australian legal tender. The 2006 Australia-Japan Year of Exchange commemorative was also included in a circulating coin set issued by the Japanese Mint.
20 The popular Australian Lunar Coin Series, originally The year also witnessed continuing efforts in minted for Asian markets but now admired manufacturing innovation, resulting in extra large throughout the world, celebrated the 2006 Year of coins up to 10kg, various difficult shapes, locket the Dog – an especially popular theme. coins containing loose items, and lenticular, or moving image, coins. Cook Islands and Tuvalu issues, which allow the Mint to portray a broad range of themes of interest These developments and further improvements to to collectors, were well received. This year’s Cook its ISO 9001-2000 quality management system Islands releases featured a silver tribute to His helped Gold Corporation win a number of awards Holiness Pope John Paul II, and saw the start of the recognising its core business. These included: remarkably popular Fire Engines of the World silver • Winner of the international XXIV MDC (Mint series. Tuvalu silver coin sets, including the Directors Conference) Coin Competition for the Evolution of the Fighter Plane and International Most Innovative Coin - Eureka Stockade 150th Classic Cars, also found eager buyers. Anniversary Locket Coin. • Winner of the Western Australian Industry and Export Overall, precious metals used in coins sold by Gold Awards for the categories of Marketing and Design Corporation in 2005/2006 amounted to 5.22 tonnes Excellence, and Large Advanced Manufacturer. of gold (5.05 tonnes the previous year), 36.65 tonnes • First in the Australia Post WA Direct Mail Award – of silver (39.31 tonnes the previous year) and 300kg Discover Australia. of platinum (100kg the previous year). • Second in the Vicenza Numismatic International Prize for the World’s Finest Coin - Eureka Stockade 150th Anniversary Locket Coin.
21 Precious Metal Coin Blanks The Perth Mint Shop and Exhibition The Poongsan Perth Mint joint venture owning the The Perth Mint is a popular attraction in Perth. precious metal blank business was dissolved During the year, just over 86,000 visitors paid to amicably during the year as the partner company enter the Gold Exhibition, which includes the famous re-evaluated its strategic priorities. Gold Gold Pour - an 8% increase on the previous year. In Corporation purchased its partner’s interest and addition, many people came to shop, attend functions now owns 100% of the business, which supplies or to enjoy refreshments at the new Tea Garden, gold, silver, platinum and palladium blanks to other resulting in more than of 130,000 visitors . mints around the world as feedstock into their Many of the visitors are overseas and interstate minting processes. tourists and Gold Corporation takes seriously its It was an exciting year under the new involvement in the tourist industry. Its staff attended arrangements, with volumes increasing six major tourism trade fairs during the year and its significantly. A total of 8.6 million precious metal direct contact with the tourism industry enabled it blanks were supplied, compared to 6.6 million in the to tailor offerings to suit various operators. previous year. A number of large coin programs Packages including the Tea Garden and Gold Pour, launched by other mints put severe pressure on special combined visits during the wildflower season blank suppliers and The Perth Mint has proved itself and joint initiatives with other attractions in Perth a reliable business partner to many of them. had a promising start and will be developed further.
A project initiated to address production volumes, The increase in precious metal prices resulted in a efficiencies and waste reduction in all processes very busy bullion centre in The Perth Mint Shop, yielded significant benefits during the year. with both bullion coins and bars selling in large Further benefits are expected as the project is quantities. The Mint’s numismatic coins also continued in the current year. continued to sell in large numbers and tourists responded positively to other uniquely Australian products offered for sale, including natural gold nuggets set in jewellery, pink and other diamonds, opals and pearls.
The Perth Mint Shop, Exhibition and Tea Garden are housed in a beautiful, heritage-listed building, which opened in 1899. A project has commenced to enhance the visitor experience using these attractions. The project will be developed over an extended period and the end result will be an even more valuable tourism asset for Perth and Western Australia.
22 Perth Mint Depository AGR Matthey Rising and volatile metals prices during the year led to AGR Matthey is a partnership between the Gold the fastest growth ever in Perth Mint Depository Corporation subsidiary, Western Australian Mint business - in the quantity of metal held, in new account (40%), Australian Gold Alliance Pty Ltd (40%) a openings, and in buy and sell transactions. There are subsidiary of Newmont Mining Corporation and now over 3,400 clients domiciled in more than 80 Johnson Matthey (Aust) Ltd (20%) a subsidiary of countries who have deposited almost $900million Johnson Matthey plc. worth of precious metal with Gold Corporation. Refining of gold and silver and the production of gold Perth Mint Depository’s three products, Perth Mint and silver bars and bullion in other forms is undertaken Depository Services, Perth Mint Certificate Program at the Newburn Refinery in Western Australia and and Perth Mint Gold, showed significant growth. the precious metal products business (jewellery and industrial products) is carried out in Melbourne.
Almost all of Australia’s gold was refined by AGR Matthey during the financial year as well as gold from surrounding countries and secondary gold from offshore, largely Asia. The Newburn refinery’s volume throughput makes it one of the largest gold refineries in the world.
The business had a successful year, making a significant contribution to Gold Corporation’s result. Refining and Treasury operations once again performed solidly with innovative distribution initiatives helping to off-set subdued physical demand resulting from relatively high gold prices. The industrial products and jewellery business is being restructured to create greater focus and customer service levels. This process is well underway and should improve longer term profitability.
23 Westmill Women comprised 45.5% of the employees. Of the managers reporting to the CEO (Tier 2) 50% were Kaltails women and of the Tier 3 employees (reporting to Gold Corporation’s Westmill division holds a 10% Tier 2), 31% were women. interest in the Kaltails gold tailings retreatment project Reflecting the tight labour market in Western Australia, in Kalgoorlie. Newmont Australia owns the other gross staff turnover increased to 11% from 9% and the 90% and activity in the past financial year has been avoidable turnover rate increased to 8.5% from 5.5%. limited to ongoing rehabilitation, at minimal cost. COMPLAINTS POLICY AND CUSTOMER State Batteries SERVICE CHARTER A number of former State Battery sites were vested Gold Corporation recognises the importance of excellent in Gold Corporation some time ago and were closed service to its customers. As a public statement of down soon after. Westmill has inherited responsibility commitment to service and complaints handling, the for them and, even though they are no longer operating, Corporation’s Complaints Policy and Customer some have been leased to independent operators Service Charter embodies the following elements: for various uses at minimal revenue. • A documented and whole-of-organisation commitment Several may be classified as contaminated sites and to the efficient and fair resolution of complaints. application has been made to the Department of • Fairness to the complainant. Environment for funding for rehabilitation. This has • Adequate staff resources, with a high level of been received favourably in respect of one of the delegated authority. sites and discussions are in progress on how such • Speedy and courteous responses. projects should be managed. • No charges for the handling of complaints. • A formal system to determine causes and STAFF implement remedies. • Systematic recording of complaints and their outcomes. The total number of permanent and contract staff • Analysis of statistics and trends. increased from 170 to 196 because of higher activity • Regular reviews of the quality management and levels. Of these, 185 were full time and 11 were complaints handling system. part-time. They were assigned as shown below:
30 June 2006 30 June 2005 In the coin business, 26,614 orders were processed Gold Corporation 34 31 and there were 51 complaints – most of which Western Australian Mint 92 related to damage in transit. Depository processed GoldCorp Australia 51 47 6,217 orders, and there were no complaints. Total 196 70
Of the people in the organisation as at 30 June 2006, 124 were salaried staff and 72 were award employees.
24 INDUSTRY AND COMMUNITY PARTICIPATION part of its ongoing participation in technical working As part of its functions under the Gold Corporation groups related to precious metal coins and blanks. Act 1987, the Corporation is mandated to encourage Sponsorships of the arts and charities continued in interest in precious metals and the Australian gold 2005/2006, including the second year of the Mint’s industry. Its mission statement also requires it to sponsorship of the Western Australian Symphony promote the history and heritage of Australia Orchestra’s Patrons’ Program. through its coins. Production of The Perth Mint’s newsletter, Australian The Perth Mint is a silver member of the Perth Numismatic Post, continued and was mailed and Convention Bureau and a bronze member of the e-mailed to Mint members and subscribers together with Tourism Council Western Australia. It is also a regular new product catalogues throughout the year. member of the Australian Tourism Export Council, the Australian Institute of Export, Museums CLOSING COMMENTS Australia, Tourism WA Network, Association of I would like to thank my colleagues in management Perth Attractions, the Perth Regional Tourism and all the employees of Gold Corporation for their Association and Experience Perth. efforts during a demanding but satisfying year. As part of its continuing effort to promote The Perth As for the future, Gold Corporation is well placed for Mint as a tourist attraction, it participated in a the new financial year and beyond. Business number of tourism trade shows throughout the year. conditions continue to be favourable and a number These included Corroboree Downunder UK in of initiatives which have been embarked on should Adelaide; Australian Tourism Export Council enable the business to continue delivering Meeting Place in Sydney; Yinala Australia in Sydney; satisfactory results. the Japan Australian Mission (JAM) in Japan; Australian Tourism Exchange (ATE) Adelaide; and OZ Talk New Zealand in Auckland, New Zealand.
The Mint participated in Australasian Numismatic M E HARBUZ Dealers Association Stamp and Coin Shows in Chief Executive Officer Sydney (twice), Melbourne, Perth and Brisbane, and Licensed Post Office Conferences in Melbourne, Perth and Sydney. In August 2005 The Perth Mint was represented at the American Numismatic Association Coin Show in San Francisco and at the Beijing International Coin Fair. In February 2006 it hosted a function at the Berlin World Money Fair, the biggest coin show in the world – an event where the whole industry meets. The Mint Directors Conference held its biennial meeting in Paris in April where The Perth Mint presented papers as
25
Corporate Governance
BOARD OF DIRECTORS The Board of Directors is the governing body of Gold Corporation. The Gold Corporation Act 1987 empowers the Board to determine policies for the Corporation and its subsidiaries, and requires the Board to: • promote and develop markets for gold and gold products in Australia and elsewhere; • develop and expand the Corporation’s business for the benefit and to the greatest advantage of the people of Australia; • operate in accordance with prudent commercial principles; and • strive to earn a commercial rate of return on its capital.
The Board’s authority is limited by the provisions in the Act and by Ministerial direction. The Board acknowledges its accountability to the Corporation’s only shareholder, the Government of Western Australia.
The Board is committed to sound corporate governance principles, high standards of legislative compliance, and appropriate financial and ethical behaviour. The Board regards directorial and managerial conduct seriously and as an integral part of sound governance practices. In accordance with that, the Board has committed itself to comply, wherever applicable, with the spirit and letter of the Australian Institute of Company Directors Code of Conduct and Guidelines. Additionally, Directors can seek independent professional advice on Board matters at the Corporation’s expense, with the approval of the Chairman. No such advice was sought during the year.
Membership Directors are appointed by the Governor of Western Australia on the nomination of the Minister and approval by Cabinet. There was no change in the composition of the Board during the 2005/06 financial year. At year- end the Gold Corporation Board consisted of eight non-executive Directors and two executive Directors.
27 Director Status Expiry of Term P J Unsworth (Chair) Non-executive 30 June 2008 S J Boyd Non-executive 30 June 2007 R F Edwards Non-executive 30 June 2007 J L Langoulant Non-executive 30 June 2008 D Mackay-Coghill Non-executive 30 June 2009 M D Pop Non-executive 30 June 2007 D R Smith Non-executive N/A, ex-officio C S Wharton Non-executive 31 October 2007 M E Harbuz Executive 30 June 2009 R G Hayes Executive 30 June 2007
Director Biographies Dr SUSAN (Sue) BOYD, BA Dip Ed D Litt (HC) GAICD Sue Boyd is an Independent Trustee of the Argyle PETER UNSWORTH CA, B.Com Diamond Mine Trusts (Gelganyem and Kilkayi Peter Unsworth was appointed Chairman of Gold Trusts); a Board member of RRRT, the South Corporation, effective from 1 July 2001. A Chartered Pacific’s Regional Human Rights Organisation; an Accountant and corporate finance specialist, Mr Executive Business Coach; a member of the Senate Unsworth has extensive experience as a public and of the University of Western Australia; International private company director, and is a director of AGR Advisor to UNIFEM Australia; Adjunct Associate Matthey. Formerly an Executive Director of a leading Professor in the Centre for International Health at Western Australian stock broking company, his Curtin University; and President of the Australian career has included six years with an international Institute for International Affairs (WA Branch). accounting firm in Perth and Sydney and six years From 1971-2003 Dr Boyd was a member of the with the Perth Stock Exchange. Department of Foreign Affairs and Trade, serving as a senior Australian diplomatic representative in Europe, North America, Asia and the Pacific. She was Australian High Commissioner in Fiji 1999-2003, and concurrently High Commissioner to Tuvalu, Nauru and Tuvalu, and Australia’s Permanent Representative to the South Pacific Forum Secretariat. Previous postings were Australian Consul General in Hong Kong (1998-1999); Australian Ambassador to Vietnam (1994-1998) and Australian High Commissioner in Bangladesh (1986- 1989). She is a former journalist and teacher.
28 DR RONALD EDWARDS DON MACKAY-COGHILL B.Ed, M.Ed (Hons), Dip Tch TAFE, Ed.D Don Mackay-Coghill retired as the inaugural Chief Dr Ron Edwards was the Federal Member for the Executive Officer of Gold Corporation on 30 June seat of Stirling from 1983 to 1993. He has a strong 2003 after leading the Corporation for 17 years. Mr background in economics through his formal Mackay-Coghill emigrated from South Africa in education, his career in lecturing in economics and 1986 to take up the dual positions of Chief Executive administrative studies, and as Chairman of the Officer of GoldCorp Australia and Managing Director Federal Parliamentary Labor Party Committee on of the Western Australian Mint. Before that, he had Economics and Industrial Relations. a 15-year career with International Gold Corporation (Intergold), being appointed Chief More recently Dr Edwards has taken on roles as Executive, Worldwide, in 1979. During his time at Chairman of the Anglican Church Board of Youth Intergold, Mr Mackay-Coghill was responsible for Ministries, Chairman of Seafood Experience the introduction of the Krugerrand to world Australia, the national seafood promotion body, and markets, which created the first global market for Chairs the Rock Lobster Industry Advisory bullion coins. Mr Mackay-Coghill is Chairman of Committee. He is a board member of the Polly AGR Matthey. Farmer Foundation for aboriginal youth and acts as a consultant to the European Union Trade negotiations for the prawn and lobster industries, MARTINE POP PhD EEC Commercial Law the yellow fin tuna aquaculture project in Geraldton, Martine Pop had more than 12 years of credit, risk Tenix Corporation and Jackson Wells Morris. management and control management experience with Macquarie Bank and Challenge Bank, in senior
JOHN LANGOULANT B.Ec (Hons) and executive positions. Ms Pop worked for more than six years as an Executive Consultant with Ernst John Langoulant is the Chief Executive of the & Young, providing risk management and corporate Chamber of Commerce and Industry of Western management/governance advisory services to the Australia, a position he has held since July 2004. private and public sectors. She is currently on the Prior to taking on this position Mr Langoulant board of Verve Energy and chairs the Audit and Risk worked in the Commonwealth and Western Management Committees for a number of WA Australian Treasury Departments. Between 1995 agencies. She held during the last ten years board and 2004, Mr Langoulant ran the Western positions with the Australian Rail Track Corporation, Australian Department of Treasury and Finance as SBS, The Grain Pool of WA and chaired the Western the Government’s Under Treasurer. Australian Meat Industry Authority. Mr Langoulant also serves on several governing bodies including as a member of the Senate of the University of Western Australia, a Director of the Telethon Institute for Child Health Research, and a Director of the Industry Capability Network, the WA Ballet and the State Supply Commission.
29 DAVID SMITH B.Econ (Hons) M EDWARD HARBUZ B Sc (Eng), MBL David Smith represents the Western Australian Under Ed Harbuz was appointed Chief Executive Officer of Treasurer, Mr Timothy Marney. He is currently the Gold Corporation on 1 July 2003. Mr Harbuz was Executive Director of the Economic area in the Western Managing Director of the South African Mint Australian Department of Treasury and Finance. In this Company Pty Ltd for almost seven years until 2001 role Mr Smith heads a team that provides advice to the and Group Managing Director of Cullinan Holdings government of the day on the state and structure of the Limited, one of South Africa’s oldest industrial WA economy. This encompasses State revenue now companies prior to that. Preceding this, he was and into the future as well as financial arrangements Chief Executive of Cullinan Refractories and with the Commonwealth. Managing Director of Steetley Refractories in the United Kingdom. Mr Harbuz holds a Master of Mr Smith has been with the Department of Treasury Business Leadership from the University of South and Finance for nine years in a number of roles. Africa and a BSc (Engineering Electrical) from the These have included a period as chief of staff in the University of Natal. Mr Harbuz is a member of the Treasurer’s office. Prior to moving to Perth, Mr Pearling Industry Advisory Committee. Smith had a long career with the Commonwealth public service, working most recently in the Department of the Prime Minister and Cabinet and RICHARD HAYES B.Comm, MBA, CPA, ACIS the Department of Foreign Affairs and Trade on Richard Hayes was appointed as Chief Financial Officer international trade issues. He has worked overseas of Gold Corporation in March 2003. He was previously with government including three years in Geneva the Chief Operating Officer and a Director of AGR under the original World Trade Organisation Matthey from October 2002 to March 2003 and prior to negotiations and in the private sector with a that he was Director, Finance and Deputy Managing London-based economic research unit. Director of AGR Joint Venture from December 1998 to October 2002. He was Chief Financial Officer and Company Secretary of Golden West Refining CHRIS WHARTON Corporation Ltd, an ASX listed company controlled by Chris Wharton is currently the Managing Director of N M Rothschild & Sons Ltd which, in December 1998, Channel Seven Perth, a position he has held since merged with Gold Corporation’s refining and jewellery 2000. Prior to joining Channel Seven, Mr Wharton was manufacturing business to become AGR Joint the Chief Executive Officer of the Community Venture. Mr Hayes came to Australia from Newspaper Group (since 1995) and had over 17 years Zimbabwe in 1987 and held a number experience with News Limited companies in a variety of financial management positions of roles. Mr Wharton is a member of the WA Olympic with Boral Ltd. and Commonwealth Games Fundraising Committees and is on the Board of Trustees of the Telethon Trust.
30 Meeting Attendance Audit Committee There were seven formal meetings of the Directors The Committee advises the Board on the quality, of Gold Corporation during the year ended 30 June integrity, reliability and adequacy of the 2006. The number of meetings attended by each Corporation’s information, accounting and control Director is indicated in the table below. systems. The Committee acts as a communications interface between the Board and the Corporation’s
Directors’ Meeting Attendance internal and external auditors.
Attended Eligible Membership of the Committee comprises P J Unsworth (Chair) 7 7 Ms Pop (Chair), Mr Unsworth and Mr Mackay- S J Boyd 6 7 Coghill. Attendees at meetings of the Committee R F Edwards 4 7 were Mr Hayes (CFO), Mr Chris Mumme (Manager, J L Langoulant 7 7 Corporate Governance & Risk Management) and D Mackay-Coghill 6 7 Ms Anne Melville (Group Accountant). Mr Harbuz M D Pop 4 7 (CEO) is a permanent invitee. Attendees and D R Smith 4 7 invitees do not have voting rights. The Audit C S Wharton 7 7 Committee met six times during the financial M E Harbuz 7 7 year. Attendance at the meetings is indicated in R G Hayes 6 7 the table below.
Board Committees Audit Committee Meeting Attendance The Board has established two committees, chaired by Attended Eligible independent non-executive Directors, to assist in the M D Pop (Chair) 6 6 execution of its duties. These are the Audit Committee D Mackay-Coghill 6 6 and the Remuneration and Allowances Committee. P J Unsworth 6 6 Each committee member has only one vote and each M E Harbuz (invitee) 6 6 resolution must be passed by unanimous agreement. R G Hayes (attendee) 5 6 In the event that agreement cannot be reached, the A P Melville (attendee) 6 6 matter is referred to the Board for resolution. C J Mumme (attendee) 6 B M Suchecki (attendee) 1 1
31 Remuneration and Allowances Committee MANAGEMENT COMMITTEES The Board of Directors delegates authority for determining conditions of employment to the Executive Management Committee Remuneration and Allowances Committee. The The Executive Management Committee consists of Committee’s responsibilities include determining the senior managers of Gold Corporation. It meets senior staff salary levels, alterations to core conditions weekly and is chaired by Mr Harbuz. Committee of employment and incentive bonus schemes. meetings provide a forum for senior managers to keep the management team abreast of key issues The Remuneration and Allowances Committee in their area and to discuss strategic issues facing consists of Mr Unsworth (Chair), Mr Mackay-Coghill the Corporation. and Mr Harbuz. Ms Susan Coutts-Wood, Manager Human Resources, also attends the meetings by Risk Management invitation. The Committee met three times during the financial year. Attendance at the meetings is The Board actively monitors the Corporation’s risk indicated in the table below. management function to ensure it is comprehensive and integrated with key processes such as divisional decision making, project management and Remuneration and Allowances Committee planning. Regular monthly and quarterly reports are Meeting Attendance submitted to the Board on group financial risk, Attended Eligible credit and audit matters, occupational safety and P J Unsworth (Chair) 3 3 health, and environmental issues. Divisional M E Harbuz 3 3 managers also report on the identified major risk D Mackay-Coghill 3 3 issues relating to their areas of responsibility. S J Coutts-Wood (invitee) 3 3
CORRUPTION PREVENTION Fraud and Corruption controls are an integral component of Gold Corporation’s Risk Management program.
The organisation’s policies and practices are reviewed regularly and are subject to internal and external audit programs. Staff awareness sessions including new staff induction, are conducted. Any suspected or actual breaches will be reported to the Corruption and Crime Commission.
There were no incidents reported in the 2005/2006 financial year.
32 PUBLIC INTEREST DISCLOSURE AGR MATTHEY Gold Corporation is committed to the aims and Gold Corporation, through its subsidiary Western objectives of the Public Interest Disclosure Act 2003 Australian Mint, has a 40% interest in the AGR Matthey (Whistleblower Protection). It recognises the value partnership. This interest entitles Gold Corporation to and importance of contributions of staff to enhance representation on the AGR Matthey Board of Directors administrative and management practices and and this was composed of Mr Unsworth, Mr Mackay- strongly supports disclosures being made by staff Coghill and Mr Harbuz (who was appointed as an as to corrupt or other improper conduct. additional Director during the year).
The induction process for new staff includes In addition to the above, Mr Mackay-Coghill holds discussion of the public interest disclosure process, the position of Chairman of the AGR Matthey Board staff awareness sessions are held and information of Directors and Mr Harbuz serves on AGR on the public interest disclosure process and forms Matthey’s Audit Committee. are available on Gold Corporation’s intranet. There were five meetings of the Directors of AGR The Public Interest Disclosure Officer during the Matthey during the year ended 30 June 2006. The year was Mr Mumme. No claims were submitted number of meetings attended by each Gold during the 2005/2006 period. Mr Bron Suchecki Corporation Director is indicated in the table below. (appointed Manager, Governance and Risk in July
2006) has taken over the position of Public Interest AGR Matthey Directors’ Meetings Disclosure Officer from 10 July 2006. Attended Eligible D Mackay-Coghill (Chair) 5 5 M E Harbuz 5 5 P J Unsworth 5 5
33 Group Directory
GOLD CORPORATION GOLDCORP AUSTRALIA Europe Street Address:Perth Mint Buildings, 310 THE PERTH MINT Street Address:Hildesheimerstr. 29 Hay Street, East Perth, WA 6004, Australia D-38159Vechelde, Germany Tel:+61 8 9421 7222 Australia Tel:+49 5302 930 426 Fax:+61 8 9221 2258 Street Address:Perth Mint Buildings Mobile:+49 160 991 41935 Postal Address:GPO Box M924, Perth, WA Tel:+61 8 9421 7222 E-Mail:[email protected] 6843, Australia Fax:+61 8 9221 3812 Contact:Günther Wolters E-mail:[email protected] E-mail:[email protected] Region – Middle East & India Website: www.perthmint.com.au Contact:Veronica Maguire, General Contacts: M Edward Harbuz, Manager Minted Products Neera Savara Chief Executive Officer Address:P O Box 42982, Dubai Bee Ng, Executive Assistant to the The Americas United Arab Emirates (U.A.E.) Chief Executive Officer Street Address:Perth Mint Buildings Tel:+971 4 351 6788 Tel:+61 8 9421 7222 Fax:+971 4 359 5677 PERTH MINT DEPOSITORY Fax:+61 8 9221 3812 Email:[email protected] E-mail:[email protected] Street Address:Perth Mint Buildings Region – Africa Tel:+61 8 9421 7280 Contact:Ron Currie, Sales and Gordon Chakaodza Fax:+61 8 9221 7074 Marketing Director Street Address:Level 8, 350 Collins Street E-mail:[email protected] Melbourne, VIC 3000 Contacts:Nigel Moffatt, Treasurer and Hong Kong Tel:+61 3 9483 7888 or 61 401 872 062 Manager, Perth Mint Depository PMHK Ltd Fax:+61 3 8601 1180 Nathan Woodrow, Client Relations Executive Street Address:Room 1401, Jubilee Centre 46 Gloucester Road Email:[email protected]
WESTERN AUSTRALIAN MINT Wanchai, Hong Kong Tel:+852 2525 1130 Street Address:Perth Mint Buildings Fax:+852 28106809 AGR MATTHEY Tel:+61 (8) 9421 7271 E-mail:[email protected] Street Address:Horrie Miller Drive, Fax:+61 (8) 9421 7499 Contact:Dominic Leung Newburn WA6104 E-mail: [email protected] Tel:+61 8 9479 9999 Contact:Justin Kees, General Manager Fax:+61 8 9479 9909 Operations Japan K’dom Company Ltd E-mail:[email protected] Website:www.agrmatthey.com.au THE PERTH MINT SHOP Street Address:Eminence Hirakawacho 401 2-12-17 Hirakawacho Chiyoda-Ku Contacts:Brian Bath, Chief Executive Officer Street Address:Perth Mint Buildings Tokyo 102-0093 Danielle Harmon, Personal Assistant to Tel:+61 8 9421 7478 Tel:+81 3 3237 3067 the Chief Executive Officer Fax:+61 8 9221 9804 Fax:+81 3 3237 3068 E-mail:[email protected] Contact:Koji Ishikawa Contact:Cathy Anza, Manager Perth Mint Shop
34 Corporate Directory
REGISTERED OFFICE MINISTER Street Address: The Hon. Eric S Ripper BA DipEd MLA Perth Mint Buildings Deputy Premier; Treasurer; Minister for 310 Hay Street Government Enterprises; Minister East Perth, WA 6004, Australia Assisting the Minister for Public Sector Telephone:+61 8 9421 7222 Management. Facsimile:+61 8 9221 2258 E-mail:[email protected] STATUTE Postal Address:GPO Box M924 Gold Corporation was established under Perth WA 6843, Australia the Gold Corporation Act 1987. Website:www.perthmint.com.au
DIRECTORS P J Unsworth (Non-executive, Chairman) S J Boyd (Non-executive) R F Edwards (Non-executive) J L Langoulant (Non-executive) D Mackay-Coghill (Non-executive) M D Pop (Non-executive) D R Smith (Non-executive) C S Wharton (Non-executive) M E Harbuz (Executive, CEO) R G Hayes (Executive, CFO)
JOINT COMPANY SECRETARIES B M Suchecki A P Melville
BANKERS Westpac Banking Corporation
35 Statutory Reporting Requirements
FINANCIAL ESTIMATES Once Gold Corporation’s Record Keeping Plan has The following financial estimates for 2006/2007 are been approved, the efficiency and effectiveness of based on Gold Corporation’s budget and are included to the organisation’s record keeping systems will be satisfy the requirements of Treasurer’s Instruction 953. reviewed not less than once every 5 years. Furthermore, Gold Corporation must report on its $000 Total revenue 676,046 record keeping training program and its Total expenditure 670,043 effectiveness and efficiency. Gold Corporation Operating profit before income tax 6,003 currently offers an “Introduction to Record Keeping” Income tax expense 1,828 session to all relevant new staff which includes their Operating profit after income tax 4,175 individual responsibilities under the Act. Relevant Dividend 2,505 staff then receive one-on-one training in the use of Retained earnings 20,829 the Mint’s electronic document & records management system that underpins its records RECORDS MANAGEMENT management requirements. Additional training Under the requirements of the State Records Act sessions are offered on an ad hoc basis or when an 2000, Gold Corporation is obligated to report on its assessment of the current program determines the compliance with the Act and communicate this in its need for changes to the existing training program. annual report. Previously, Gold Corporation has All induction and training programs are reinforced submitted a Record Keeping Plan to the State by printed/electronic manuals, policies and Records Office outlining its records program, procedures. The entire program is supported by the systems and training. At present Gold Corporation Records Manager and Records Coordinators. maintains a CLEARED status but is continuing its submissions as required under the Act. It is FREEDOM OF INFORMATION anticipated that the organisation will receive an One application was lodged at Gold Corporation under APPROVED status within the next financial year. Freedom of Information (FOI) legislation in 2005/2006.
36 FREEDOM OF INFORMATION STATEMENT Documents which are available for purchase are: The following Information Statement has been 90 Golden Years (published in 1989); The Perth Mint prepared by Gold Corporation pursuant to Part 5 of Numismatic Issues 1986 – 1996 (published in 1996); the Freedom of Information Act 1992 (WA) and Striking Gold: 100 Years of The Perth Mint guidelines issued by the Office of the Information (published in 1999); and A Century of Minting Commissioner on 13 May 1994. Excellence – The History of Australian Coin Production at The Perth Mint (published in 1999).
The Corporation Documents which can be obtained free of charge Gold Corporation was established by the Gold include Perth Mint brochures and catalogues, Corporation Act 1987 and the Minister responsible media statements, annual reports and The for the Corporation is the Hon Eric Ripper MLA, Australian Numismatic Post newsletter. Back Deputy Premier, Treasurer, Minister for Government issues of The Australian Nugget Journal, which Enterprises and Minister Assisting the Minister for ceased publication in February 2001, are also Public Sector Management. Details of the Corporation’s available. These can be obtained on request by mail mission statement, functions, structure and to GPO Box M924, Perth, Western Australia, 6843, or management are available elsewhere in this report. The Perth Mint website, www.perthmint.com.au
The Corporation has no policy role in government, FOI Exemption makes no laws or regulations except in relation to the conduct of its own affairs, and administers no A document is exempt if its disclosure would reveal schemes that confer benefits upon or place imposts information about: on the public. • gold or other precious metal received by Gold Corporation from a person, or held by Gold Section 6 of the Act empowers the Corporation’s Corporation on behalf of a person, on current Board of Directors “... to determine the policy of account, certificate of deposit or fixed deposit; or Gold Corporation, the Mint and GoldCorp in relation • a transaction relating to gold or other precious to any matter and to control the affairs of Gold metal received or held by Gold Corporation. Corporation and each of its subsidiaries...”
The Corporation’s Board is committed to sound FOI Procedures and Access corporate governance principles, high standards of It is the aim of the Corporation to make information legislative compliance and ethical business practice. available promptly and at the least possible cost, and whenever possible, documents will be provided The Corporation keeps documents and files relating to outside the FOI process. its administration and business activities. A number of these documents can be inspected only under the If information is not routinely available, the Freedom Freedom of Information Act 1992 (WA) (FOI). of Information Act 1992 (WA) provides the rights enabling the public to apply for documents held by the Corporation.
37 Access applications have to (i) be in writing; Application should be made in writing within 30 days (ii) provide sufficient information to enable of receiving the notice of decision. Applicants will be identification of the requested documents; notified of the outcome of the review within 15 days. (iii) provide an Australian address to which notices FOI inquiries or applications should be made to the FOI can be sent; and (iv) be lodged at the Corporation, Coordinator, Ms Bee Ng, Executive Assistant to the Chief together with any application fee payable. Executive Officer, Gold Corporation, 13 0 Hay Street, East Applications will be acknowledged in writing and the Perth, WA 6004, telephone (08) 9421 7222, facsimile applicant will be notified of the decision within4 5 days. (08) 9221 7031, email: [email protected]. Inquiries or applications may also be directed to the Applicants who are dissatisfied with a decision of the Manager, Human Resources, Ms Susan Coutts-Wood, Corporation may request an internal review. email: [email protected]
SECTION 175ZE OF THE ELECTORAL ACT 1907 (WA) 1 Section 175ZE of the Electoral Act 1907 (WA) requires a public agency to include a statement in its annual report detailing all expenditure incurred by or on behalf of the agency during the financial year in relation to: a advertising agencies; b market research organisations; c polling organisations; d direct mail organisations; and e media advertising organisations. 2 Details of this expenditure are as follows: a total expenditure: $357,659 b in relation to each class of expenditure : i amount of expenditure: advertising agencies $ 32,163 market research organisations Nil polling organisations Nil direct mail organisations $281,406 media advertising organisations $ 44,090 ii details of persons, agencies or organisations to whom the expenditure was paid: advertising agencies - Linx Advertising Inc $ 5,382 - Unique Advertising Ltd $ 26,781 market research organisations Nil polling organisations Nil direct mail organisations - Lasermail $281,406 media advertising organisations - Media Decisions $ 42,740 - Ray Burns Media $ 1,350
38 Senior Management (at 30 June 2006)
GOLD CORPORATION Chief Executive Officer: M E Harbuz Chief Financial Officer: R G Hayes Treasurer & Manager, Perth Mint Depository: N P Moffatt Group Accountant and Joint Company Secretary: A P Melville Corporate Analyst and Joint Company Secretary: B M Suchecki Manager, Information Systems B R Shah Manager, Human Resources: S J Coutts-Wood Manager, Corporate Governance & Risk Management: C J Mumme
GOLDCORP AUSTRALIA General Manager Minted Products: V Maguire
WESTERN AUSTRALIAN MINT General Manager Operations: J K Kees
AGR MANAGEMENT SERVICES PTY LTD* Chief Executive Officer: B F Bath Chief Financial Officer: J R Shephard
*AGR Management Services Pty Ltd (AGRMS) is owned 40% by the Western Australian Mint, 40% by Australian Gold Alliance Pty Ltd (a wholly owned subsidiary of Newmont Australia Ltd) and 20% by Johnson Matthey (Aust) Ltd (a wholly owned subsidiary of Johnson Matthey plc). AGRMS manages AGR Matthey, pursuant to the provisions of the Partnership Agreement.
39 Auditor General’s Opinion
40 AUDITOR GENERAL INDEPENDENT AUDIT OPINION
To the Parliament of Western Australia
GOLD CORPORATION FINANCIAL STATEMENTS AND PERFORMANCE INDICATORS FOR THE YEAR ENDED 30 JUNE 2006
Audit Opinion In my opinion, (i) the financial statements are based on proper accounts and present fairly the financial position of the Gold Corporation and the consolidated entity at 30 June 2006 and their financial performance and cash flows for the year ended on that date. They are in accordance with applicable Accounting Standards and other mandatory professional reporting requirements in Australia and the Treasurer’s Instructions; (ii) the controls exercised by the Corporation provide reasonable assurance that the receipt, expenditure and investment of moneys, the acquisition and disposal of property, and the incurring of liabilities have been in accordance with legislative provisions; and (iii) the key effectiveness and efficiency performance indicators of the Corporation are relevant and appropriate to help users assess the Corporation’s performance and fairly represent the indicated performance for the year ended 30 June 2006.
Scope The Board is responsible for keeping proper accounts and maintaining adequate systems of internal control, for preparing the financial statements and performance indicators, and complying with the Financial Administration and Audit Act 1985 (the Act) and other relevant written law.
The financial statements consist of the Income Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement of the Corporation and the consolidated entity, and the Notes to the Financial Statements.
The performance indicators consist of key indicators of effectiveness and efficiency.
Summary of my Role As required by the Act, I have independently audited the accounts, financial statements and performance indicators to express an opinion on the financial statements, controls and performance indicators. This was done by testing selected samples of the evidence. Further information on my audit approach is provided in my audit practice statement. Refer "http://www.audit.wa.gov.au/pubs/Audit-Practice-Statement.pdf".
An audit does not guarantee that every amount and disclosure in the financial statements and performance indicators is error free. The term “reasonable assurance” recognises that an audit does not examine all evidence and every transaction. However, my audit procedures should identify errors or omissions significant enough to adversely affect the decisions of users of the financial statements and performance indicators.
D D R PEARSON AUDITOR GENERAL 19 September 2006
4th Floor Dumas House 2 Havelock Street West Perth 6005 Western Australia Tel: 08 9222 7500 Fax: 08 9322 5664
41 Performance Indicators
Gold Corporation is a body corporate incorporated in terms The Corporation is required to operate in accordance of the Gold Corporation Act 1987 of Western Australia. with prudent commercial principles, to generate revenue sufficient to meet its expenditure and to The purpose of Gold Corporation is to: derive a profit that represents a commercial rate of • develop, manufacture and market Australian legal return on its capital. tender investment coins and other products that promote the ownership of physical precious metal Under the Treasurer’s Instructions 904 and 905, a for investment purposes; statutory authority is required to provide appropriate key • design, manufacture and market proof, performance indicators in its Annual Report, namely: commemorative and numismatic coins and • Relevant agency level government desired outcome(s) related products; • key effectiveness indicators which provide • make available investment products that enable information on the extent of achievement of an investors to have exposure to the value of precious agency level government desired outcome metals without having to deal with the security • key efficiency indicators relating an outcome to and other issues associated with the keeping of the level of resource input required to deliver it. the physical metal; Given the above Treasurer’s Instructions and taking • provide storage and safekeeping facilities for into account the Corporation’s functions under the precious metals; Gold Corporation Act 1987, its outcomes are: • be a major supplier of precious metal blanks to the mints of the world; 1 Maximisation of the Value Added to, and Income • operate a tourist attraction, based on the themes Derived from, Precious Metal Coins and Other of gold and minting, that is important to Perth and Products and Services Western Australia; The Australian Nugget and Lunar bullion gold coins • supply refining and other services to the gold and Kookaburra silver coins have a market share in industry of Australia; and the world. The Perth Mint’s various proof, numismatic • preserve the historical mint building and artefacts and commemorative coins made of gold, silver and that are part of the heritage of Perth and Australia. platinum are added value precious metal products which are also distributed world wide. Coin blanks are supplied in increasing quantities to the US Mint and other mints in the world.
42 2 Preservation and Promotion of The Perth Mint’s THE RELATIONSHIP BETWEEN Heritage Assets and History GOVERNMENT GOALS AND GOLD CORPORATION’S PERFORMANCE The Perth Mint Exhibition includes gold pouring demonstrations, the Industry Collection of Gold The Goal most aligned to Gold Corporation’s Bars Worldwide, historical information on the gold business operations is: industry in Western Australia and a comprehensive To develop a strong economy that delivers more range of investor and numismatic coins. It is an jobs, more opportunities and greater wealth to integral part of The Perth Mint heritage and a Western Australians by creating the conditions premier tourist destination. required for investment and growth
Gold Corporation makes a small contribution to creating the conditions required for investment and growth by its support and promotion of the gold industry.
EFFECTIVENESS INDICATORS 2002-2003 2003-2004 2004-2005 2005-2006 Target The key effectiveness indicators for outcome No. 1 are: 1 Global market share of Australian Nugget gold bullion coin: (Note 1) 9% 9% .3% 11.6% 12% 2 Coin programs - value added to gold, silver, platinum & palladium: (Note 2) (a) Total premium income: $14.0m $15.8m $20.5m $22.8m $22.3m (b) Total premium income expressed as a percentage of precious metal value: 9.9% 8.4% 0.0% 7.3% 16.9% 3 Estimated proportion of Australian fine gold production refined by AGR Matthey (Note 3) 99.9% 99.9% 99.9% 99.9% 100%
4 Return on equity (Note 4) -5.9% 0.5% 3.9% .6% 10% 5 Dividends/income tax equivalent payable to the West Australian Government (Note 5) -0- -0- $2.4m $3.0m $3.0m The key effectiveness indicators for outcome No. 2 are: 6 a) Visitors to Perth Mint Exhibition (Note 6) 72,000 78,000 81,000 86,000 82,000 b) Visitors’ satisfaction level 99.9% 98.6% 98.6% 99.9% 100%
Notes: 1 For 2003/2004 onwards the figures are based on Gold Fields Mineral Services data for the previous calendar year. (Up to 2002/2003, the figures are based on World Gold Council data for calendar years.) 2 The calculation is the total premium income (amount of income received above metal cost) for all financial year legal tender coin sales, which is also expressed as a percentage of the value of the precious metal content of the coins. The effectiveness indicator includes all Australian legal tender coins, as well as coins produced for other countries. A significant volume of non-coin precious metal product (eg medallions and coin blanks) was produced also during the financial year.
43 3 This figure represents 100% of AGR Matthey’s share of total Australian refined gold production in the finanical year. This calculation is based on AGR Matthey’s records and an estimate of total Australian fine gold production provided by the Australian Bureau of Agricultural and Resource Economics. 4 The percentages show Gold Corporation’s return on equity at the end of the respective financial year, based on the profit from ordinary activities before income tax. This is the performance measure referred to in the Gold Corporation Act. Provided the Corporation derives a profit, the WA Government receives the benefit of receipt of income tax equivalents and annual dividends from the Corporation. 5 Income tax equivalent, calculated as if the Corporation were a public company, is payable to the WA Government on profit from ordinary activities. Dividends are payable annually as a percentage of after-tax profit. These payments are forecast annually in Gold Corporation’s business plan, and included in the Financial Estimates in the Annual Report. 6 a Total number of visitors (to nearest thousand) to the Exhibition annually, based on recorded daily visitor traffic. b Satisfaction levels are derived from random sampling of comments entered into the visitors’ book which is available in the foyer of The Perth Mint. 7 Comparative figures have been adjusted where necessary to conform with changes in presentation of the financial statements under AIFRS.
SERVICES 1 Precious Metal Coins and Other Products and Services Bullion or investment coins represent a significant market for gold and it is important that The Perth Mint increases demand by promoting its well-known gold Nugget and its other bullion coins. It is also important that proof, commemorative and numismatic coins are promoted as these add significant value to precious metal and most of these are exported. Value is also added to precious metals in the manufacture and supply of coin blanks to other mints in the world. 2 Cultural Heritage Conservation Gold Corporation continually upgrades The Perth Mint heritage buildings situated at 310 Hay Street, and currently has a project underway to renovate and conserve the historically significant building at 292 Hay Street in the grounds of The Perth Mint. It also preserves historical artefacts and documents related to minting and the gold industry in Western Australia.
EFFICIENCY INDICATORS
2002-2003 2003-2004 2004-2005 2005-2006 Target The key efficiency indicators for service No. 1 are: 1 Trading profit as a proportion
of sales revenue: (Note 1) 7.2% 5.3% 6.1% .9% .9% 2 Staff costs as a proportion
of trading profit (Note 2) 57.1% 9.0% 54.5% 53.6% 52%
The key efficiency indicator for service No. 2 is: 3 Average cost per Exhibition/visitor
expressed as an index (Note 3) 00 3 9 33 Notes: 1 The percentages show the proportion of Gold Corporation’s sales revenue represented by the trading profit (gross margin) for the respective financial year. 2 Staff costs include employee benefits on-costs and contract staff costs, expressed as a percentage of trading profit (gross margin). Staff costs are Gold Corporation’s major expenditure, after the cost of precious metals. 3 Average cost per Exhibition/visitor is derived by calculation of total costs of Exhibition divided by annual number of visitors expressed as an index, with the 2002-2003 year indexed as 100.
44 Certification of Performance Indicators
In our opinion, the Performance Indicators for Gold Corporation and its subsidiaries contained in this report are based on proper records, are relevant and appropriate for assisting users to assess the performance of Gold Corporation and its subsidiaries, and fairly represent the performance of the Group for the year ended 30 June 2006.
P J UNSWORTH M E HARBUZ Chairman Executive Director
19 September 2006
45 Certification of Financial Statements
The accompanying financial statements of Gold Corporation and the accompanying consolidated financial statements have been prepared in compliance with the provisions of the Financial Administration and Audit Act 1985 (WA) from proper accounts and records to present fairly the financial transactions for the year ended 30 June 2006.
At the date of signing, we are not aware of any circumstances which would render the particulars included in these financial statements misleading or inaccurate.
P J UNSWORTH M E HARBUZ R G Hayes Chairman Executive Director Chief Finance Officer
19 September, 2006
46 Financial Statements
47 48
GOLD CORPORATION
FINANCIAL REPORT
YEAR ENDED 30 JUNE 2006 49
GOLD CORPORATION AND SUBSIDIARIES INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation INCOME Note 2006 2005 2006 2005 Revenue $000 $000 $000 $000 Sales 2,32 932,607 395,707 870,889 332,286 Charges for technical services 32 603 6,250 1,307 1,081 Fees and rents 2,158 1,361 1,735 842 Interest revenue 4,784 2,398 4,784 2,397 Other Income Foreign currency hedging - 101 - 101 Net profit on sale of assets 11 13 - - - Revaluation increase in buildings 11 498 398 - - Dividends from subsidiaries 3 - - 6,500 3,000 Share of profits of joint venture partnerships 9 2,775 - - - Total Income 943,438 406,215 885,215 339,707 EXPENSES Cost of sales 2,32 905,865 371,648 869,761 331,383 Employee benefits 10,979 9,335 3,353 2,679 Materials and services 14,996 19,260 3,770 3,006 Depreciation 11 1,478 1,201 142 142 Amortisation 12 360 69 360 69 Computer rentals 270 388 270 388 Bad debts - 4 - - Finance costs 1,676 949 1,476 746 Net loss on sale of assets 11 - 4 - 5 Currency translation movements 206 3 206 3 Foreign currency hedging 23 33 - 33 - Share of loss of joint venture partnerships 9 302 1,137 - - Total Expenses 936,165 403,998 879,371 338,421 PROFIT BEFORE INCOME TAX 7,273 2,217 5,844 1,286 Income tax expense 4 2,433 869 2,313 763
PROFIT FOR THE PERIOD 4,840 1,348 3,531 523
The Income Statements are to be read in conjunction with the Notes to the Financial Statements 50
GOLD CORPORATION AND SUBSIDIARIES BALANCE SHEETS AS AT 30 JUNE 2006 Group Gold Corporation
Note 2006 2005 2006 2005 $000 $000 $000 $000 CURRENT ASSETS Cash and cash equivalents 5 23,109 19,070 22,030 17,962 Receivables 6 4,617 3,814 11,987 2,923 Precious metal leases 7a 590,140 457,537 590,140 457,537 Inventories 7b 513,994 168,470 474,990 142,859 Prepayments 612 503 450 433 Total current assets 1,132,472 649,394 1,099,597 621,714
NON-CURRENT ASSETS Investments accounted for using the equity method 9 14,819 14,320 - - Other financial assets 10 - - 21,603 21,603 Deferred tax assets 4 373 660 373 660 Property, plant and equipment 11 40,078 34,065 576 628 Intangible assets 12 2,195 1,623 2,195 1,623 Total non-current assets 57,465 50,668 24,747 24,514 TOTAL ASSETS 1,189,937 700,062 1,124,344 646,228
CURRENT LIABILITIES Payables 13 24,427 17,797 17,411 9,609 Interest-bearing borrowings 14 213,766 147,265 210,266 143,765 Current tax liabilities 4 1,939 71 1,939 71 Employee benefits 15 1,420 1,255 908 735 Other liabilities 16 886,095 476,616 855,667 456,957 Total current liabilities 1,127,647 643,004 1,086,191 611,137
NON-CURRENT LIABILITIES Employee benefits 15 258 229 117 93 Total non-current liabilities 258 229 117 93 TOTAL LIABILITIES 1,127,905 643,233 1,086,308 611,230
NET ASSETS 62,032 56,829 38,036 34,998
EQUITY Contributed equity 17 31,603 31,603 31,603 31,603 Asset revaluation reserve 17 11,456 9,968 - - Hedge reserve 17 (632) - - - Retained earnings 19,605 15,258 6,433 3,395 TOTAL EQUITY 62,032 56,829 38,036 34,998
The Balance Sheets are to be read in conjunction with the Notes to the Financial Statements. 51
GOLD CORPORATION AND SUBSIDIARIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation
Note 2006 2005 2006 2005 $000 $000 $000 $000 Total equity at beginning of financial year 56,829 56,868 34,998 36,584
CONTRIBUTED EQUITY Balance at beginning of financial year 17 31,603 31,603 31,603 31,603
Balance at end of financial year 31,603 31,603 31,603 31,603
RESERVES Asset Revaluation Reserve Balance at beginning of financial year 9,968 9,246 - - Revaluation land 11 - 10 - - Revaluation buildings 11 1,488 712 - - Balance at end of financial year 17 11,456 9,968 - -
Hedge Reserve Balance at beginning of financial year - - - - Share AGR Matthey hedge reserve (632) - - - Balance at end of financial year 17 (632) - - -
RETAINED EARNINGS Balance at beginning of financial year 15,258 16,019 3,395 4,981 Net profit for the period 4,840 1,348 3,531 523 Dividends to shareholder (493) (2,109) (493) (2,109) Balance at end of financial year 19,605 15,258 6,433 3,395
Total equity at end of financial year 62,032 56,829 38,036 34,998
Total recognised income and expense for the period 5,696 2,070 3,531 523
The Statements of Changes in Equity are to be read in conjunction with the Notes to the Financial Statements 52
GOLD CORPORATION AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation
Note 2006 2005 2006 2005 $000 $000 $000 $000 Cash flows from operating activities Receipts from customers 937,881 405,575 233,365 234,183 Payments to suppliers and employees (930,097) (400,246) (229,543) (227,896) Distributions from joint venture partnerships - 949 - - Interest received 3,888 2,352 3,888 2,351 Interest paid (1,583) (1,262) (1,331) (1,061) Net cash provided by operating activities 18 10,089 7,368 6,379 7,577
Cash flows from investing activities Payments for plant and equipment (3,946) (1,643) (183) (424) Payments for intangibles-computer software (932) (1,419) (932) (1,419) Proceeds from sale of plant and equipment 117 226 93 225 Payment for investment in partnerships - (560) - - - - Net cash provided by/(used in) investing activities (4,761) (3,396) (1,022) (1,618)
Cash flows to Government Income tax equivalent paid (796) - (796) - Dividend paid (493) (2,109) (493) (2,109) Net cash flow to Government (1,289) (2,109) (1,289) (2,109)
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,039 1,863 4,068 3,850 Cash and cash equivalents at 1 July 19,070 17,207 17,962 14,112
CASH AND CASH EQUIVALENTS AT 30 JUNE 5 23,109 19,070 22,030 17,962
The Statements of Cash Flows are to be read in conjunction with the Notes to the Financial Statements. 53
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES
Gold Corporation is an entity domiciled in Australia. The consolidated financial report of Gold Corporation for the year ended 30 June 2006 comprises Gold Corporation and its subsidiaries (together referred to as the Group) and its interest in associates and jointly controlled entities. The significant accounting policies adopted by Gold Corporation and its subsidiaries are stated to assist in general understanding of the financial statements. These policies are consistently applied.
(a) Statement of Compliance The financial report constitutes a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and UIG Interpretations, as applied by the Treasurer's Instructions.
The Financial Administration and Audit Act 1985 and the Treasurer's Instructions (TIs) are legislative provisions governing preparation of financial reports and take precedence over Australian Accounting Standards and other authoritative pronouncements of the AASB and UIG interpretations. The Treasurer's Instructions may modify or clarify their application, disclosure, format and wording to provide certainty and to ensure consistency and appropriate reporting across the public sector. If any such modification has a material or significant financial effect upon the reported results, details of that modification and, where practicable, the resulting financial effect are disclosed in individual notes to the financial report.
International Financial Reporting Standards (IFRS) form the basis of Australian Accounting Standards adopted by the AASB, and for the purpose of this report are called Australian equivalents to IFRS (AIFRS) to distinguish from previous Australian GAAP.
This is the Group's first financial report prepared in accordance with AIFRS and AASB 1, First Time Adoption of AIFRS , has been applied. An explanation of how the transition to AIFRS has affected the reported financial position, financial performance and cash flows of the Group and Gold Corporation is provided in Note 28. (b) Basis of preparation The Group cannot early adopt an Australian Accounting Standard or UIG Interpretation unless specifically permitted by TI 1101 'Application of Australian Accounting Standards and Other Pronouncements'. TI 1101 has only mandated the early adoption of revised AASB 119, AASB 2004-3, AASB 2005-3, AASB 2005-4 and AASB 2005-6.
Consequently the Group has not applied the following Australian Accounting Standards and UIG Interpretations that have been issued but are not yet effective. These will be applied from their application date: 54
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Basis of preparation (continued) (i) AASB 7: Financial Instruments: Disclosures (including consequential amendments in AASB 2005-10 'Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 and AASB 1038]'). This Standard requires new disclosures in relation to financial instruments. The Standard is required to be applied to annual reporting periods beginning on or after 1 January 2007. The Standard is considered to result in increased disclosures of an entity's risks, enhanced disclosure about components of a financial position and performance, and changes to the way of presenting financial statements, but otherwise there is no financial impact. (ii) AASB 2005-01: Amendments to Australian Accounting Standards (May 2005) amending AASB 139: Financial Instruments: Recognition and Measurement (iii) AASB 2005-5: Amendments to Australian Accounting Standards (June 2005) amending AASB 1: First time Adoption of Australian Equivalents to International Financial Reporting Standards ( July 2004) and AASB 139: Financial Instruments: Recognition and Measurement. (iv) AASB 2005-10: Amendments to Australian Accounting Standards (September 2005) makes consequential amendments to AASB 132: Financial Instruments: Disclosures and Presentation , AASB 101: Presentation of Financial Statements, AASB 114: Segment Reporting, AASB 117: Leases , AASB 133: Earnings per Share, AASB 139: Financial Instruments: Recognition and Measurement, AASB 1: First-time adoption of Australian Equivalents to International Reporting Standards, arising from the release of AASB 7. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007. (v) AASB 2006-1: Amendments to Australian Accounting Standards ( January 2006) amending AASB 121: The Effects of Changes in Foreign Exchange Rates (July 2004) (vi) AASB 2006-2: Amendments to Australian Accounting Standards (March 2006) (vii) UIG 4: Determining whether an Arrangement contains a Lease (viii) UIG 5: Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (ix) UIG 8: Scope of AASB 2. The Group plans to adopt all of these standards and amendments, if applicable, in the 2007 financial year. The initial application of the above standards and amendments is not expected to have an impact on the financial results of the Group and Gold Corporation as the standards and amendments either do not apply or are concerned only with disclosures. The following Amendments and UIG Interpretations are not applicable to the Group as they will have no impact: (i) AASB 2005-9: Amendments to Australian Accounting Standards ( September 2005) requires that liabilities arising from the issue of financial guarantee contracts are recognised in the balance sheet. AASB 2005-9 is applicable for annual reporting periods beginning on or after 1 January 2006. (ii) UIG 7: Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary Economies 55
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Basis of preparation (continued) The financial report is prepared on the basis of historical costs except for precious metal inventories, derivative financial instruments and land and buldings, which are stated at fair value. The financial report is presented in Australian dollars, which is the Group's functional and presentation currency, rounded to the nearest thousand dollars in accordance with Treasurer's Instruction 948.
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the Group. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial report and in preparing an opening AIFRS balance sheet at 1 July 2004 for the purposes of transition to Australian Accounting Standards - AIFRS, except for the change in accounting policy relating to the classification and measurement of financial instruments. The impact of the change in accounting policy is disclosed in Note 29 to the financial statements.
(c) Basis of consolidation The consolidated financial statements comprise the financial statements of Gold Corporation and all controlled entities. A controlled entity is any entity controlled by Gold Corporation. Control exists where Gold Corporation has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Gold Corporation to achieve the objectives of Gold Corporation.
Where controlled entities enter or leave the Group during the year, their operating results are included from the date control was obtained or until the date control ceased.
(i) Subsidiaries Investments in subsidiaries are brought to account at cost in Gold Corporation. The carrying amount of investments is reviewed annually to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the underlying net assets in the particular entities. The expected net cash flows from investments are discounted to their present value in determining the recoverable amounts. 56
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Basis of consolidation (continued) (ii) Partnerships and Joint Ventures The group's interests in partnerships are accounted for under the equity accounting method as set out in AASB 131 Interests in Joint Ventures . The Group's share of post-acquisition profits or losses of partnerships is recognised in the income statement. (iii) Transactions eliminated on consolidation Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group's interest in the entity, with adjustments made to the "Investments in associates" and "Share of associates net profit" accounts. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the associate or jointly controlled entities or, if not consumed or sold by the associate or jointly controlled entity, when the Group's interest in such entities is disposed of. (d) Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined. (e) Derivative financial instruments Current accounting policy The Group uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from operating, financing and investing activities. In accordance with its treasury policy, the group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. Comparative period policy The Group is exposed to changes in foreign exchange rates from its activities. The Group uses forward foreign exchange contracts to hedge these risks. Derivative financial instruments are not held for speculative purposes. The quantitative effect of the change in accounting policy is set out in Note 29. 57
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (f) Cash and cash equivalents Cash and cash equivalents comprise cash balances, call deposits and commercial bills. (g) Receivables Current accounting policy Trade and other receivables are stated at their amortised cost less impairment losses (see Note 1j). Comparative period policy Trade and other receivables are carried at invoice amounts. The collectability of debts is assessed at reporting date and specific provision is made for any doubtful amounts. Bad debts are written off as incurred. (h) Inventories Precious metal inventories are valued at fair value, being market prices ruling at balance date. Other inventories are stated at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Cost is assigned on a first-in - first-out basis except for retail inventories where a weighted average method is used. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. (i) Property, plant and equipment Freehold land and buildings Freehold land and buildings are carried at fair value as required by Treasurer's Instruction 945. (Note 11 ). The fair value of land and buildings is based on the annual valuations provided by the Valuer General's office. Plant and equipment Plant and equipment is carried at cost less accumulated depreciation and impairment losses.
Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred. Depreciation Buildings, plant and equipment are depreciated over their estimated useful lives using the straight line method. Freehold land is not depreciated. Profits or losses on disposal of property, plant and equipment are taken into account in the income statement. The expected useful life for each class of asset in the current and comparative periods is as follows: Buildings 40 years Plant and equipment 3 - 8 years 58
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Property, plant and equipment (continued) The residual value and the useful life and depreciation method applied to an asset are reassessed at least annually. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. (j) Impairment The carrying amounts of the Group's assets, other than inventories (Note 1(h)) and deferred tax assets (Note 1(n)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash- generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. Calculation of recoverable amount The recoverable amount of the Group's receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (ie the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Reversals of impairment Impairment losses are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount. An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 59
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Intangible Assets All computer software which is not integral to the operation of computer hardware is classified as an intangible asset with a finite useful life, and is stated at cost less accumulated amortisation and impairment losses (see Note 1j). Amortisation is charged to the income statement on a straight-line basis over the estimated useful life of the intangible asset. Intangible assets are amortised from the date they are available for use. The estimated useful lives in the current and comparative periods are: Computer software 3 - 5 years Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
(l) Employee benefits Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the income statement as incurred. Employee entitlements for annual leave and long service leave are provided for in accordance with AASB 119, Employee Benefits . The liability for annual leave expected to be settled within 12 months of the reporting date is recognised in provisions in respect of employees' services up to the reporting date, and is measured at the amounts expected to be paid when the liabilities are settled. The liability for long service leave is recognised in provisions and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future salary and wage levels, experience of employee departures and periods of service. The expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. All annual leave and unconditional long service leave provisions are classified as current liabilities.
(m) Precious metal borrowings Precious metal borrowings are brought to account at market prices ruling at balance date.
(n) Income tax Gold Corporation is subject to the National Tax Equivalent Regime (NTER), under the State Enterprises (Commonwealth Tax Equivalents) Act 1996. The NTER is administered by the Australian Taxation Office (ATO) on behalf of the States. Under the NTER, the income tax equivalent revenue is remitted to the Treasurer of Western Australia, for credit of the Consolidated Fund. Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. 60
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Income tax (continued) Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Group has formed a tax consolidated group with effect from 1 July 2002, and is taxed as a single entity. All tax assets and liabilities, expenses and benefits, are recognised in Gold Corporation, which according to its legislation is liable to pay income tax on behalf of its subsidiaries.
(o) Operating Leases Leases under which all risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to the income statement in the periods in which they are incurred over the term of the lease, as this represents the pattern of benefits derived from the leased assets.
(p) Revenue (i) Sales revenue Sales revenue represents revenue earned from the sale of precious metals, precious metal products and other products and services. It also includes margins on transactions known as metal location swaps, where a quantity of metal is sold in one location, and simultaneously an equivalent quantity is purchased in another location. Bullion sales are recognised on receipt of cash. Proof coin sales are recognised on despatch of the coins. Revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the purchaser. (ii) Interest revenue Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. (iii) Dividends Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting. 61
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (q) Funds received from Government Government grants are recognised in the balance sheet initially as deferred income. A grant that compensates the Group for expenses incurred is recognised as revenue in the income statement on a systematic basis in the same periods in which the expenses are incurred.
(r) Payables Current accounting policy These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Trade and other payables are stated at their amortised cost. The amounts are non-interest bearing and are usually paid within 30 days of recognition. Comparative period policy Trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. (s) Finance costs Finance costs include interest and amortisation of discounts or premiums relating to borrowings, and are recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Interest payments in respect of financial instruments classified as liabilities are included in finance costs.
(t) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
(u) Goods and services tax Revenue, expenditure and assets are recognised net of the amount of goods and services tax (GST) except where the amount of GST incurred is not recoverable from the ATO. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as an expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities that are recoverable from, or payable to, the ATO are classified as operating cash flows. 62
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1 SIGNIFICANT ACCOUNTING POLICIES (continued) (v) Segment reporting A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
Group Gold Corporation 2 TRADING PROFIT Note 2006 2005 2006 2005 $000 $000 $000 $000
Sales 32 932,607 395,707 870,889 332,286 Cost of sales Opening trading inventories 5,153 6,126 (186) (304) Purchases 907,435 370,675 869,677 331,501 912,588 376,801 869,491 331,197 Less closing trading inventories 6,723 5,153 (270) (186) Cost of sales 905,865 371,648 869,761 331,383 Trading Profit 26,742 24,059 1,128 903
3 DIVIDENDS
(a) DIVIDEND TO WA GOVERNMENT In accordance with section 21 (4) of the Gold Corporation Act, the Board recommended to the Treasurer that an amount of $2,904,000 (2005: $493,000) be payable as dividend for the financial year ended 30 June 2006. The dividend was declared and approved after the end of the financial year and therefore has not been provided for in the financial statements. 2006 2005 (b) DIVIDENDS FROM SUBSIDIARIES $000 $000 In accordance with sections 44(b) and 53(b) of the Gold Corporation Act, the Board has determined that dividends be paid to the Corporation by its subsidiaries as follows: Western Australian Mint - - GoldCorp Australia 6,500 3,000 6,500 3,000 63
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation Note] 2006 2005 2006 2005 4 INCOME TAX $000 $000 $000 $000 (a) Income Tax Expense Current tax expense Current year 2,457 71 2,457 71 Current year - overseas tax of associate 9b 120 106 - - Underprovision of tax in prior year 207 - 207 - Deferred tax expense Origination and reversal of temporary differences 287 953 287 953 Recognised in asset revaluation reserve (in equity in subsidiaries) (638) (305) (638) (305) Underprovision of tax in prior year 11 - 44 - 44 Total income tax expense in income statement 2,433 869 2,313 763
(b) Numerical reconciliation between tax expense and pre-tax net profit Profit before income tax 7,273 2,217 5,844 1,286 Prima facie income tax on pre-tax accounting profit calculated at 30% (2005: 30%) 2,182 665 1,753 386 Increase in income tax expense due to: Non-deductible depreciation on buildings 11 11 - - Difference in accounting profit and taxable income of partnerships 53 194 - - Other non-deductible items 145 21 74 12 Decrease in income tax expense due to: Non-assessable income (4) (66) - (42) Dividends from subsidiaries - - (1,950) (900) 2,387 825 (123) (544) Under-provision of income tax in prior year 207 44 207 44 Under-provision of deferred tax asset in prior year (161) - (161) - Income tax expense/(benefit) on pre-tax profit 2,433 869 (77) (500) Obligations of Gold Corporation for income tax on behalf of subsidiaries ( i ) - - 2,390 1,263 2,433 869 2,313 763 Note (i) Gold Corporation's income tax expense of $2,313,000 (2005: $763,000) includes the obligation in relation to the income of its subsidiaries, Western Australian Mint and GoldCorp Australia, in accordance with its legislation. 64
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation 2006 2005 2006 2005 4 INCOME TAX (Continued) $000 $000 $000 $000
(c) Deferred tax assets and liabilities Deferred tax assets Doubtful debts 6 6 6 6 Write-down of inventories 546 204 546 204 Plant and equipment 103 221 103 221 Other payables 262 - 262 - Employee benefits 503 445 503 445 Deferred revenue 10 14 10 14 1,430 890 1,430 890 Deferred tax liabilities Interest revenue (18) - (18) - Property, plant and equipment (1,039) (230) (1,039) (230) Deferred tax assets/liabilities after set-off 373 660 373 660
(d) Movement in deferred tax assets/(liabilities) Opening balance 660 1,657 660 1,657 Employee benefits 58 46 58 46 Deferred revenue (4) (9) (4) (9) Write-down of inventories 342 (102) 342 (102) Property, plant and equipment (927) (364) (927) (364) Other payables 262 - 262 - Interest revenue (18) - (18) - Unrealised foreign exchange losses - (62) - (62) Utilisation of tax losses brought forward - (506) - (506) Closing balance 373 660 373 660
(e) Movement in the current tax liability: Opening balance 71 - 71 - Provision for current year 2,457 71 2,457 71 Underprovision for prior year 207 - 207 - Amount paid during the year (796) - (796) - Closing balance 1,939 71 1,939 71 65
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation 2006 2005 2006 2005 5 CASH AND CASH EQUIVALENTS $000 $000 $000 $000 Cash and cash equivalents 23,109 19,070 22,030 17,962
Reconciliation of Cash For the purposes of the Statements of Cash Flows, cash includes cash on hand and at bank, short term deposits at call and commercial bills. Cash as at the end of the financial year as shown in the Statements of Cash Flows is reconciled to the related items in the Balance Sheets as follows: Cash at bank and on hand 1,406 2,347 327 1,239 Call deposits 15,787 6,861 15,787 6,861 Commercial bills 5,916 9,862 5,916 9,862 23,109 19,070 22,030 17,962
6 RECEIVABLES Current Trade receivables 2,951 3,083 - - Other receivables 1,685 751 1,649 751 (19) (20) - - Loans to subsidiaries ( i ) - - 10,338 2,172 4,617 3,814 11,987 2,923 (i) Loans to subsidiaries are interest free and have no fixed terms of repayment.
7a PRECIOUS METAL LEASES Current Precious metal leases - related entity ( i ) 590,140 457,537 590,140 457,537 ( i ) Precious metal leases - related entity The ounce based leases of precious metals to AGR Matthey are provided under the terms of a Metal Facility Agreement, and are held as inventory by AGR Matthey.
7b INVENTORIES Current Precious metals 507,122 162,754 474,990 142,859 Inventories Finished goods - at net realisable value 5,617 4,668 - - Work in progress 555 97 - - Consumables - at net realisable value 700 951 - - 513,994 168,470 474,990 142,859 66
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
8 INVESTMENTS IN ASSOCIATED ENTITIES Group PrincipalGroup Carrying Amount of Entity ActivitiesOwnership Interest Investment 2006 2005 2006 2005 Associated Companies % % $000 $000 AGR Management Services Pty Ltd Management services 40.0 40.0 - - Poongsan Perth Mint Sales Pty Ltd Marketing 50.0 50.0 - - Partnerships AGR Matthey Metal refining and precious 40.0 40.0 14,819 12,796 metal products business AGR Joint Venture Metal refining and precious 50.0 50.0 - - metal products business Unincorporated Joint Ventures Poongsan Perth Mint JV Manufacturing and marketing - 50.1 - 1,524 precious metal blanks Group's Share in Partnership's Direct Interest in Associates Metals Refining Operations Pty Ltd Metal refining 18.0 18.0 - - Alloy and Gold Supply (NSW) Pty Ltd Precious metals 20.0 20.0 - - Analytical Platinum Supplies Pty Ltd Platinum lab ware 20.0 20.0 - - AGR Matthey (NZ) Limited Sales precious metal products 40.0 40.0 - -
All the above investments are held by Western Australian Mint. The Group's interests in the above investments, except for AGR Matthey (NZ) Limited, Poongsan Perth Mint Sales Pty Ltd and Poongsan Perth Mint JV, took effect from 1 December 1998 with the commencement of the AGR Joint Venture, and were subsequently transferred into the AGR Matthey partnership on 3 October 2002 (Note 9) The investment in AGR Management Services Pty Ltd comprises a 40% interest in the ordinary share capital of the associate and is held by Western Australian Mint. The investment in AGR Matthey (NZ) Limited commenced upon its incorporation in New Zealand on 29 August 2003. The investment comprises a 40% interest in the ordinary share capital of the associate and is held via the group's interest in AGR Matthey. The investment in Poongsan Perth Mint Sales Pty Ltd comprises a 50% interest in the ordinary share capital of the associate and is held by Western Australian Mint. Following the termination of Poongsan Perth Mint JV, this company is being wound up. The investment in Metals Refining Operations Pty Ltd comprises an 18% interest in the ordinary share capita of the associate and is held via the Group's interest in AGR Matthey. However AGR Matthey wrote-down the investment in this associate to a nominal value as at 30 June 2005 and ceased the equity accounting of this investment, due to the loss of management control and the deterioration in its operating performance subsequent to the transfer of management control to the majority shareholder. The investment in Alloy and Gold Supply (NSW) Pty Limited comprises a 20% interest in trust capital in the PBM Unit Trust and is held via the Group's interest in AGR Matthey. The investment in Analytical Platinum Supplies Pty Ltd comprises a 20% interest in the ordinary share capital of the associate and is held via the Group's interest in AGR Matthey. The balance date of the associated entities is 30 June. Their country of incorporation/residence is Australia, except for Metals Refining Operations Pty Ltd and AGR Matthey (NZ) Limited which are in Papua New Guinea and New Zealand respectively. 67
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group 2006 2005 9 INVESTMENTS ACCOUNTED FOR USING $000 $000 THE EQUITY METHOD Share of profit/(loss) from AGR Matthey 9b 2,775 (641) Share of (loss) from Poongsan Perth Mint JV 9c (302) (496) 2,473 (1,137) Non-current Investments Investment in AGR Matthey 9b 14,819 12,796 Investment in Poongsan Perth Mint JV 9c - 1,524 14,819 14,320 9a INVESTMENT IN AGR JOINT VENTURE The Group equity accounted its interest in the AGR Joint Venture partnership. The Group's share of the assets, excluding cash and debtors, and liabilities of the AGR Joint Venture were transferred to the AGR Matthey partnership as at 3 October 2002. The AGR Joint Venture partnership ceased trading on 2 October 2002, but remains in existence for winding-up purposes.
9b INVESTMENT IN AGR MATTHEY Balance at 1 July 12,796 14,132 Plus: Share of partnership profit/(loss) before tax (ii) 2,775 (641) Less: Profit distributions received - (949) Contribution to AGR Joint Venture - 360 Less: Share of movement in hedge reserve (632) - Less: Accrual for overseas tax (120) (106) Balance at 30 June 14,819 12,796
( i ) The AGR Matthey partnership was formed on 3 October 2002 between Western Australian Mint, Australian Gold Alliance Pty Ltd and Johnson Matthey (Aust) Ltd. The partners hold a 40%, 40%, 20% interest in the AGR Matthey partnership respectively. The investment in AGR Matthey partnership comprises the fair value of the Group's contributed assets and post formation profits. The balance date of the partnership is 30 June. The Group equity accounts its interest in the AGR Matthey partnership. The Group's share of the assets and liabilities of the AGR Matthey partnership at 30 June 2006 comprised: Group AGR Matthey 100% 2006 2005 2006 2005 $000 $000 $000 $000 Total assets 437,873 310,973 1,094,683 777,432 Total liabilities 422,691 297,649 1,056,728 744,123 NET ASSETS 15,182 13,324 37,955 33,309
(ii) Results attributable to Partnership Revenue 2,690,396 2,179,772 6,725,989 5,475,323 Expenses 2,687,621 2,180,413 6,719,052 5,476,926 Operating (loss)/ profit before income tax 2,775 (641) 6,937 (1,603) 68
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
9b INVESTMENT IN AGR MATTHEY (continued) Group AGR Matthey - 100% 2006 2005 2006 2005 $000 $000 $000 $000 (iii) Capital Commitments The Group's share of Partnership's commitments to purchase plant and equipment at balance date was 109 64 273 160
(iv) Lease Commitments The Group's share of Partnership's aggregate operating lease expenditure contracted for at balance date, but not provided for, in the financial statements:
Payable no later than one year 480 440 1,201 1,099 Payable later than one, but no later than five years 1,121 906 2,802 2,266 Payable later than five years 1,722 1,388 4,306 3,470 3,323 2,734 8,309 6,835
9c INVESTMENT IN POONGSAN PERTH MINT JV Balance at 1 July 1,524 1,820 Assets contributed - 200 Less: Share of partnership loss before tax (ii) (302) (496) Distribution to joint venturers (1,222) - Balance at 30 June - 1,524
(i) The Poongsan Perth Mint Joint Venture was formed on 1 February 2004 between Western Australian Mint and PMX Australia Pty Ltd, a wholly owned subsidiary of PMX Industries, Inc. The partners held a 50.1% and 49.9% interest in the Joint Venture respectively. The investment in Poongsan Perth Mint JV comprised the fair value of the Group's contributed assets and post formation profits. The balance date of the partnership was 30 June. The Poongsan Perth Mint JV ceased trading at 31 December 2005. Western Australian Mint purchased the 49.9% interest in the JV held by PMX Australia Pty Ltd as at that date. The Group equity accounted its interest in the Poongsan Perth Mint JV up to 31 December 2005. The Group's share of the assets and liabilities of the Poongsan Perth Mint JV at 30 June 2006 was nil. Group PPM JV - 100% 2006 2005 2006 2005 $000 $000 $000 $000 Total assets - 4,886 - 9,753 Total liabilities - 627 - 1,251 NET ASSETS - 4,259 - 8,502
(ii) Results attributable to Partnership Revenue 1,248 2,842 2,491 5,674 Expenses 1,550 3,338 3,181 7,634 Operating loss before income tax (302) (496) (690) (1,960) 69
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
10 OTHER FINANCIAL ASSETS Place of Book value of Contribution to Corporation Incorporation investment Group result 2006 2005 2006 2005 $000 $000 $000 $000 Gold Corporation Western Australia (554) (1,256) Subsidiaries of Gold Corporation: GoldCorp Australia Western Australia 5,000 5,000 6,390 6,478 Western Australian Mint Western Australia 16,603 16,603 (996) (3,874) W.A. Mint Pty Ltd Western Australia - - - - 21,603 21,603 4,840 1,348 All subsidiaries are wholly owned. W.A. Mint Pty Ltd has never operated. The investment is recorded at no cost.
11 PROPERTY, PLANT AND EQUIPMENT Group Gold Corporation 2006 2005 2006 2005 $000 $000 $000 $000 Freehold land and buildings at fair value 32,601 30,496 - - less : accumulated depreciation - - - - 32,601 30,496 - - Plant and equipment at cost 18,107 13,793 3,408 3,358 less : accumulated depreciation (10,630) (10,224) (2,832) (2,730) 7,477 3,569 576 628 Total Property, Plant and Equipment 40,078 34,065 576 628
The Board resolved to adopt the Valuer General's valuation of the Western Australian Mint's property at 310 Hay Street, Perth. The land and buildings were revalued as at 30 June 2006 in accordance with the Valuer General's valuation as at that date. The fair value of all land and buildings was determined by reference to current use value for the land and depreciated replacement value for the buildings. The total revaluation increment was $2,624,000 for buildings (2005: land $10,000 and buildings $1,415,000). Revaluation increment of $498,000 (2005: $398,000) was credited to the income statement as it offset similar revaluation decrement charged to retained earnings in prior years. The remaining increment of $2,126,000 (2005: $1,027,000) was credited to the asset revaluation reserve, with a corresponding debit to deferred tax of $638,000 (2005: $305,000). Net transfer to revalution reserve amounted to $1,488,000 (2005: $722,000). For each revalued property, the carrying amount that would have been recognised had the assets been carried under the cost model is impracticable to determine. This is due to the inability of accounting systems to generate the information and therefore has not been disclosed. 70
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
11 PROPERTY, PLANT AND EQUIPMENT (Continued) Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current and previous financial years: Freehold Freehold Plant & Land Buildings equipment Total Group - 2006 $000 $000 $000 $000 Opening balance 9,900 20,596 3,569 34,065 Additions (i) - - 4,971 4,971 Disposals - - (104) (104) Revaluation - 2,624 - 2,624 Depreciation - (519) (959) (1,478) 9,900 22,701 7,477 40,078 Group - 2005 Opening balance 9,890 19,665 2,873 32,428 Additions - 8 1,635 1,643 Disposals - - (230) (230) Revaluation 10 1,415 - 1,425 Depreciation - (492) (709) (1,201) 9,900 20,596 3,569 34,065 Gold Corporation - 2006 Opening balance - - 628 628 Additions - - 183 183 Disposals - - (93) (93) Depreciation - - (142) (142) - - 576 576 Gold Corporation - 2005 Opening balance - - 576 576 Additions - - 424 424 Disposals - - (230) (230) Depreciation - - (142) (142) - - 628 628 Note (i): Additions include the acquisition of assets from PMX Australia Pty Ltd for $2,709,000 upon the winding up of the Poongsan Perth Mint JV as at 31 December 2005. Group Gold Corporation Net profit/(loss) on sale 2006 2005 2006 2005 of non-current assets $000 $000 $000 $000 Plant and equipment Gross proceeds on sale/disposal of assets 117 226 93 225 Carrying value of assets sold/disposed 104 230 93 230 Net profit/(loss) on sale/disposal 13 (4) - (5) 71
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation 2006 2005 2006 2005 $000 $000 $000 $000
12 INTANGIBLE ASSETS Computer software, at cost 2,652 1,720 2,652 1,720 Less: accumulated amortisation (457) (97) (457) (97) 2,195 1,623 2,195 1,623
Movement in the carrying amount for computer software between the beginning and end of the financial year Opening balance 1,623 273 1,623 273 Additions 932 1,419 932 1,419 Amortisation expense (360) (69) (360) (69) Closing balance 2,195 1,623 2,195 1,623
13 PAYABLES Current - unsecured Trade creditors 1,394 3,189 204 305 Other payables and accrued expenses 23,000 14,558 17,207 9,304 Funds received from Government 33 50 - - 24,427 17,797 17,411 9,609
14 INTEREST-BEARING BORROWINGS Current - secured Borrowings (a) 3,500 3,500 - - Precious metal borrowings (b) 210,266 143,765 210,266 143,765 213,766 147,265 210,266 143,765 Security for Borrowings (a) Borrowings from Western Australian Treasury Corporation at commercial rates, repayable on 29 December 2006 Finance facility - utilised at reporting date 3,500 3,500 - - Finance facility - not utilised at reporting date 5,000 5,000 - - Total finance facility available 8,500 8,500 - -
(b) Precious metal borrowings are guaranteed by the Government of Western Australia under Section 22 (1) of the Gold Corporation Act, with annual limits for gold, silver and platinum approved by the Treasurer. 72
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation 2006 2005 2006 2005 $000 $000 $000 $000 15 EMPLOYEE BENEFITS Current Employee benefits - annual leave 694 599 479 372 Employee benefits - long service leave 625 574 363 315 1,319 1,173 842 687 Non-current Employee benefits - long service leave 186 160 108 87 Employee superannuation benefits 57 57 - - 243 217 108 87 Other Provisions Current Employment on-costs 101 82 66 48 Non-current Employment on-costs 15 12 9 6
16 OTHER LIABILITIES Current - secured Precious metal borrowings (a) 886,095 476,616 855,667 456,957 Security for Borrowings (a) Precious metal borrowings are guaranteed by the Government of Western Australia under Section 22 (1) of the Gold Corporation Act, with annual limits for gold, silver and platinum approved by the Treasurer. These borrowings do not attract interest, and are utilised in the Corporation's operations.
17 CAPITAL AND RESERVES Contributed Equity Issued and fully paid : 31,602,852 shares 31,603 31,603 31,603 31,603 Asset Revaluation Reserve The revaluation reserve relates to property measured at fair value in accordance with applicable Australian Accounting Standards. Hedge Reserve The hedge reserve, being the Group's share of AGR Matthey's hedge reserve, comprises the effective portion in the cumulative net change in the fair value of hedging instruments related to hedged transactions that have not yet occurred. AGR Matthey, in order to protect against adverse gold price movements on the recoupment of funds from precious metal retentions, entered into spot deferred sale contracts and put/call options to sell future gold retentions during the period. 73
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
Group Gold Corporation 2006 2005 2006 2005 $000 $000 $000 $000 18 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Cash flows from operating activities Profit for the period 4,840 1,348 3,531 523 Non-cash items: Depreciation and amortisation 1,838 1,270 502 211 Share of loss/(profit) of joint venture partnerships (2,473) 1,137 - - Accrual for overseas tax 120 106 - - Revaluation of buildings (498) (398) - - Amounts credited to: employee benefits 194 152 197 44 income tax 2,274 71 2,274 71 Amounts written back /paid from: doubtful debts (1) - - - (Profit)/loss on sales of plant and equipment (13) 4 - 5 Changes in assets and liabilities Decrease/(increase) in receivables 94 (1,801) (8,168) 5,715 (Increase) in precious metal leases (132,603) (69,524) (132,603) (69,524) (Increase) in inventories (345,524) (3,752) (332,131) (6,050) Decrease/(increase) in prepayments (109) (263) (17) (296) Increase/(decrease) in payables 5,970 3,788 7,583 1,282 Increase in borrowings 475,980 75,230 465,211 75,596 Cash flows from operations 10,089 7,368 6,379 7,577 74
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
19 SEGMENT REPORTING Product Refining Coin (a) Primary reporting-Business segments Sales Blanks TOTAL Group - 2006 $000 $000 $000 $000 Income External sales and other income 940,165 - - 940,165 Revaluation of buildings 498 Share of net profit of investments accounted for using the equity method - 2,775 - 2,775 Total income 940,165 2,775 - 943,438 Profit/(loss) before income tax expense 4,800 2,775 (302) 7,273 Income tax (expense)/benefit (2,433) Net Profit 4,840 Segment assets 1,174,745 14,819 - 1,189,564 Unallocated assets 373 Total assets 1,189,937 Segment liabilities 1,127,905 - - 1,127,905 Other Investments accounted for using the equity method - 14,819 - 14,819 Acquisition of non-current segment assets 4,878 - - 4,878 Share of net loss of investments accounted for using the equity method - - 302 302 Depreciation and amortisation of segment assets 1,838 - - 1,838 Other non-cash segment expenses 842 - - 842
Group - 2005 $000 $000 $000 $000 Income External sales and other income 405,817 - - 405,817 Revaluation of buildings 398 Total income 405,817 - - 406,215 Profit/(loss) before income tax expense 3,354 (641) (496) 2,217 Income tax (expense)/benefit (869) Net Profit 1,348
Segment assets 685,082 12,796 1,524 699,402 Unallocated assets 660 Total assets 700,062 Segment liabilities 643,233 - - 643,233 Other Investments accounted for using the equity method - 12,796 1,524 14,320 Acquisition of non-current segment assets 3,062 - - 3,062 Share of net loss of investments accounted for using the equity method - 641 496 1,137 Depreciation and amortisation of segment assets 1,270 - - 1,270 Other non-cash segment expenses 757 - - 757 Segment information has been disclosed by output 75
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
19 SEGMENT REPORTING (Continued) Business Segments Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure. Gold Corporation operates predominantly in the precious metal industry. Its revenue is derived from manufacture and marketing of precious metals and precious metal value added products, the provision of services related to precious metals, such as trading, metal leasing and consultancy, and from the refining of gold and silver (through its investment in AGR Matthey). The group has three business segments as follows: - Minting and Retailing - Product Sales This segment includes the manufacture and marketing, including wholesale and retail sales, of precious metal coins, medallions, value added precious metal products and collectables, and metal trading, leasing and depository services. - Refining This segment comprises the investment in the AGR Matthey partnership which is engaged in refining of precious metals and manufacture of industrial products. - Coin Blanks This segment comprises the investment in the Poongsan Perth Mint JV, which was engaged in manufacturing and marketing of precious metal coin blanks. Poongsan Perth Mint JV ceased trading on 31 December 2005. Accounting Policies Segment information is presented in respect of the Group's business and geographical segments. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items consist of revaluations and income tax expense and assets. Intersegment Transfers Segment revenue, expenses and results include transfers between segments. Inter-segment pricing is determined on an arm's length basis. The transfer prices are eliminated on consolidation. (b) Secondary reporting - Geographical segments Segment Revenues from Carrying Amount of Acquisitions of Non- External customers Segment Assets current Segment Assets 2006 2005 2006 2005 2006 2005 Geographical location: $000 $000 $000 $000 $000 $000 Europe 165,474 85,370 - - - - Asia 344,423 135,816 - - - - U S A 185,142 96,869 - - - - Other countries 24,839 13,847 - - - - Australia 223,062 73,915 1,189,937 700,062 4,878 3,062 942,940 405,817 1,189,937 700,062 4,878 3,062
The group's business segments are located in Australia. There are agents in Europe, Hong Kong, Japan and the Middle East. Sales revenue is derived from precious metal products exported from Australia. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. 76
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Group Gold Corporation 2006 2005 2006 2005 20 LEASE COMMITMENTS $000 $000 $000 $000 Aggregate non-cancellable operating lease expenditure contracted for at balance date but not provided for in the accounts : Payable no later than one year 288 213 288 213 Payable later than one, but no later than five years 407 287 407 287 695 500 695 500 The operating lease commitments are for leases of computer equipment The terms of these are various, with the maximum term being until December 2010
21 CAPITAL COMMITMENTS Aggregate capital expenditure contracted for, but not provided for, in the financial statements Payable no later than one year 1,136 473 397 413
22 REMUNERATION OF AUDITORS Fees paid or due and payable to the Auditor General for the financial year: fees for external audit of financial statements and performance indicators 140 110 140 110 fees for external audit of AIFRS - 35 - 35 140 145 140 145
23 FINANCIAL INSTRUMENTS (a) Foreign currency risk The group is exposed to foreign currency risk on sales and purchases in currencies other than Australian dollars. The currencies giving rise to this risk are primarily US dollars and Euros. Foreign currency risk on sales and purchases are generally not hedged, except for purchases of certain capital items. The group uses forward exchange contracts to hedge such purchases, and contracts have maturity of less than one year after reporting date.
The net fair value of forward exchange contracts used as hedges of forecasted transactions at 30 June 2006 was a liability of $33,300 (2005: Nil), which has been charged to the income statement.
(b) Interest rate risk exposure The Group's exposure to interest rate risk and the effective weighted average interest rate for each class class of financial assets and financial liabilities is set out on the following pages. No interest rate hedging has been entered into during the period.
In accordance with the option provided by AASB 1.36A and exercised by TI 1106, financial instrument information prepared under AASB 132 and AASB 139 will transition on 1 July 2005, and consequently comparative information for 2004-05 is presented on an AGAAP basis. 77
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
23 FINANCIAL INSTRUMENTS (continued) Fixed interest Floating Non- interest Notes maturing in 1 Total interest rate bearing year or less
2006 $000 $000 $000 $000 Financial and Precious Metal Assets Cash and cash equivalents 5 11,669 11,416 24 23,109 Receivables 6 - - 4,617 4,617 Precious metal leases 7a - 590,140 - 590,140 Precious metal inventories 7b - - 507,122 507,122 11,669 601,556 511,763 1,124,988 Weighted average interest rate - cash 4.85% 5.66% - precious metal leases 0.86% Financial and Precious Metal Liabilities Payables 13 - - 24,427 24,427 Borrowings 14 - 3,500 - 3,500 Precious metal borrowings 14,16 - 210,266 886,095 1,096,361 - 213,766 910,522 1,124,288 Weighted average interest rate - borrowings 6.31% - precious metal borrowings 0.34% Net financial and precious metal assets/(liabilities) 11,669 387,790 (398,759) 700
2005 Financial and Precious Metal Assets Cash and cash equivalents 5 8,646 10,399 25 19,070 Receivables 6 - - 3,814 3,814 Precious metal leases 7a - 457,537 - 457,537 Precious metal inventories 7b - - 162,754 162,754 8,646 467,936 166,593 643,175 Weighted average interest rate - cash 3.21% 5.64% - precious metal leases 0.69% Financial and Precious Metal Liabilities Payables 13 - - 17,797 17,797 Borrowings 14 - 3,500 - 3,500 Precious metal borrowings 14,16 - 143,765 476,616 620,381 - 147,265 494,413 641,678 Weighted average interest rate - borrowings 5.94% - precious metal borrowings 0.30% Net financial and precious metal assets/(liabilities) 8,646 320,671 (327,820) 1,497 78
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
23 FINANCIAL INSTRUMENTS (continued) Reconciliation of Net Financial and Precious Metal Assets to Net Assets as disclosed in the Balance Sheet Group 2006 2005 Notes $000 $000 Net financial and precious metal assets/(liabilities) as above 700 1,497 Non-financial assets and liabilities: Inventories 7b 6,872 5,716 Prepayments 612 503 Investments accounted for using the equity method 9 14,819 14,320 Deferred tax assets/(liabilities) 4 373 660 Property, plant & equipment 11 40,078 34,065 Intangible assets - computer software 12 2,195 1,623 Current tax liabilities 4 (1,939) (71) Employee entitlements 15 (1,678) (1,484) Net assets per Balance Sheet 62,032 56,829
(c ) Net Fair Value of Financial Assets and Liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the Group and Gold Corporation approximates their carrying value.
Group Gold Corporation (d) Precious Metal Assets and Liabilities 2006 2005 2006 2005 Assets $000 $000 $000 $000 Precious metal leases 7a 590,140 457,537 590,140 457,537 Inventories 7b 507,122 162,754 474,990 142,859 Total precious metal assets 1,097,262 620,291 1,065,130 600,396 Liabilities Precious metal borrowings (secured, interest bearing) 14b 210,266 143,765 210,266 143,765 Precious metal borrowings (secured) 16 886,095 476,616 855,667 456,957 Total precious metal liabilities 1,096,361 620,381 1,065,933 600,722
Net Precious Metal Position 901 (90) (803) (326)
The $886 million of precious metals deposited by Perth Mint Depository clients (note 16) was used in operations by Gold Corporation as inventory ($507 million - Note 7b) with the balance in the refining operations of AGR Matthey (Note 7a). (e) Credit Risk Exposure The credit risk on financial assets of Gold Corporation which have been recognised on the statement of financial position is generally the carrying amount, net of any impairment losses.
The group does not have any significant exposure to any individual customer or counterparty, with the exception of precious metal leases to a related entity, AGR Matthey, under the terms of the Metal Facility Agreement. (Note 7a) 79
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
24 REMUNERATION OF DIRECTORS AND SENIOR OFFICERS Key management personnel In addition to their salaries, the Group provides non-cash benefits to key management personnel and contributes to superannuation funds on their behalf. Group Gold Corporation 2006 2005 2006 2005 $000 $000 $000 $000 Salaries, fees and non-cash benefits 1,497 1,362 1,166 1,057 Superannuation 421 345 351 282 1,918 1,707 1,517 1,339
Total fees received by non-executive directors was $366,000 (2005: $327,000), of which $75,000 was received by two directors for services on AGR Matthey Board. (2005: $85,000 was received by three directors for services on AGR Matthey Board and AGR Matthey Audit, Risk and Credit Committee)
Number of directors whose total of fees, salaries, superannuation and other benefits, received or due and receivable for the financial year, falls within the following bands: Group Gold Corporation 2006 2005 2006 2005 $0 - $10,000 1 1 1 1 $20,001 - $30,000 - 1 - 1 $30,001 - $40,000 5 2 5 2 $40,001 - $50,000 - 1 - 1 $80,001 - $90,000 2 2 2 2 $230,001 - $240,000 - 1 - 1 $240,001 - $250,000 1 - 1 - $290,001 - $300,000 - 1 - 1 $320,001 - $330,000 1 - 1 - Number of senior officers other than directors whose total of fees, salaries, superannuation and other benefits, received or due and receivable for the financial year, falls within the following bands: $50,001 - $60,000 1 - 1 - $80,001 - $90,000 - 3 - 2 $90,001 - $100,000 2 1 1 1 $100,001 - $110,000 2 2 2 2 $110,001 - $120,000 2 - 2 - $130,001 - $140,000 - 1 - - $140,001 - $150,000 1 1 - - $150,001 - $160,000 1 - - - 80
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
25 SUPERANNUATION COMMITMENTS
Gold Corporation contributes to a superannuation fund, GC-AGR Superannuation Fund, which is operated by Spectrum Super. All permanent employees of Gold Corporation are entitled to join the fund. Trustee, funds management and administration services are provided by SMF Funds Management Limited. GC-AGR Superannuation Fund provides benefits on retirement, total and permanent disability or death. Gold Corporation contributes to the fund at rates based on the salary of each member employee.
Gold Corporation employees not wishing or ineligible to join the GC-AGR Superannuation Fund are members of the ING Master Fund, to which the Corporation contributes at the current rate required by superannuation guarantee legislation. All Gold Corporation employees can request that contributions be made to a fund of their own choice, rather than the GC-AGR Superannuation Fund or ING Master Fund, in accordance with legislation. Award-based employees of the Western Australian Mint who made the election prior to December 1996 were entitled to contributory membership of the Western Australian Government Employees Superannuation Fund (Gold State Super). Such employees contribute to that Fund at specified percentages of their wages and salaries. The Western Australian Mint contributes to the Fund at rates set by the Government Employees Superannuation Board.
Western Australian Mint award employees who did not wish or who are ineligible to join Gold State Super are entitled to non-contributory membership of West State Super, to which the Western Australian Mint contributes at the current rate required by superannuation legislation. Members also have the option to make personal contributions.
26 INCENTIVE PLAN Gold Corporation's incentive plan was originally approved by the Board in 2003 and is designed to motivate all staff to strive towards the Corporation achieving an acceptable return on assets. A plan was put into place whereby an ever increasing profit target was set for Gold Corporation's own operations (excluding AGR Matthey) over a number of years. If the target for any year is exceeded then a certain proportion of the amount by which the profit exceeds target is available for distribution to employees. All employees are eligible for payments in terms of the scheme.
There are upper limits on payments to employees and an upper limit to the total amount which can be paid out. The total amount to be paid out in any year must be approved by the Board at its discretion and then all individual payments must be approved by the Remuneration and Allowances Committee.
In the 2005/06 financial year Gold Corporation's own operations (excluding AGR Matthey) exceeded their profit target, so employees will be eligible for payments. An amount of $512,000 (2005: $270,000) has been accrued in the financial statements for the year ended 30 June 2006. 81
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
27 CONTINGENT LIABILITIES (a) Gold Corporation's Westmill division holds a 10% interest in the Kaltails Joint Venture, which was engaged in gold tailings treatment. The operations ceased during the year ended 30 June 2000, and the Group is providing for closure and rehabilitation costs as required. There is a closure plan for the operation which would require capping of the storage facility within the next ten years, and this could result in considerable expense for the joint venture. Another option, not requiring the expensive capping, is being explored. (b) In prior years, ground water contamination occurred at the Newburn site of the AGR Matthey refinery. The AGR Joint Venture partners (Western Australian Mint and Australian Gold Alliance Pty Ltd) are responsible for any remediation and restoration of the site. Expenses incurred to date and expected to be incurred in the near future have been accrued for in the financial statements. It is difficult to estimate the future long-term costs, if any, of remediation. Hence it is not possible to quantify these as at 30 June 2006. 28 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) For reporting periods beginning on or after 1 January 2005, Gold Corporation must comply with AIFRS as issued by the Australian Accounting Standards Board and Treasurer's Instructions. As stated in significant accounting policies Note 1(a), these are the Group's first consolidated financial statements prepared in accordance with AIFRS. The policies set out in the significant accounting policies section of this report have been applied in preparing the financial statements for the year ended 30 June 2006, the comparative information presented in these financial statements for the year ended 30 June 2005, and in the preparation of an opening AIFRS balance sheet at 1 July 2004 (the Group's date of transition). In preparing its opening AIFRS balance sheet, the Group has adjusted amounts reported previously in financial statements prepared in accordance with the previous basis of accounting (AGAAP). An explanation of how the transition from AGAAP to AIFRS has affected the Group's financial position and financial performance is set out in the following tables and the notes that accompany the tables.
Cash Flows There were no changes in relation to the statements of cash flows. 82
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 ## EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) The following schedule sets out the adjustments to the income statements of the Group and Gold Corporation due to adoption of AIFRS for the year ended 30 June 2005. Group Gold Corporation Note 30 June 2005 30 June 2005 AGAAP Effect of AIFRS AGAAP Effect of AIFRS transition transition INCOME to AIFRS to AIFRS Revenue $000 $000 $000 $000 $000 $000 Sales revenue 395,707 395,707 332,286 332,286 Charges for technical services 6,250 6,250 1,081 1,081 Fees and rents 1,361 1,361 842 842 Interest revenue 2,398 2,398 2,397 2,397 Other income Foreign currency hedging 101 101 101 101 Proceeds from sale of plant & equipment a 226 (226) - 225 (225) - Revaluation increase in buildings h - 398 398 - - Dividends from subsidiaries - - 3,000 3,000 406,043 406,215 339,932 339,707 EXPENDITURE Cost of sales 371,548 371,548 331,383 331,383 Employee benefits b 10,340 (1,005) 9,335 2,931 (252) 2,679 Materials and services b,c 18,289 971 19,260 2,754 252 3,006 Depreciation d,e 1,311 (110) 1,201 211 (69) 142 Amortisation d - 69 69 - 69 69 Computer rentals 388 388 388 388 Bad debts 4 4 - - Finance expenses 949 949 746 746 Carrying value of plant & equipment sold a 230 (230) - 230 (230) - Net loss on sale of assets a - 4 4 - 5 5 Currency translation movements 3 3 3 3 Inventory write-down to net realisable value 100 100 - - Share of loss of JV partnerships i 1,271 (134) 1,137 - - 404,433 403,998 338,646 338,421
PROFIT BEFORE INCOME TAX 1,610 607 2,217 1,286 - 1,286 Income tax expense f,h 788 81 869 682 81 763
PROFIT FOR THE PERIOD 822 526 1,348 604 (81) 523 83
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 28 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) The following schedule sets out the adjustments to the balance sheets of the Group and Gold Corporation on transition to AIFRS as at 1 July 2004 Group Gold Corporation 1 July 2004 1 July 2004
Note AGAAP Effect of AIFRS AGAAP Effect of AIFRS transition transition to AIFRS to AIFRS $000 $000 $000 $000 $000 $000 CURRENT ASSETS Cash and cash equivalents 17,207 17,207 14,112 14,112 Receivables 1,967 1,967 8,592 8,592 Precious metal leases 388,013 388,013 388,013 388,013 Inventories 164,718 164,718 136,809 136,809 Prepayments 240 240 137 137 Total current assets 572,145 572,145 547,663 547,663 NON-CURRENT ASSETS Investments accounted for using the equity method 15,952 15,952 - - Other financial assets - - 21,603 21,603 Property, plant and equipment d,e 32,947 (519) 32,428 849 (273) 576 Deferred tax assets f 1,358 299 1,657 1,358 299 1,657 Intangible assets d - 273 273 - 273 273 Total non-current assets 50,257 50,310 23,810 24,109 TOTAL ASSETS 622,402 622,455 571,473 571,772
CURRENT LIABILITIES Payables c 15,520 84 15,604 9,278 9,278 Interest-bearing borrowings 123,515 123,515 120,015 120,015 Current tax liabilities - - - - Employee benefits g 3,267 (2,109) 1,158 2,829 (2,109) 720 Other liabilities 425,136 425,136 405,111 405,111 Total current liabilities 567,438 565,413 537,233 535,124 NON-CURRENT LIABILITIES Employee benefits 174 174 64 64 Total non-current liabilities 174 174 64 64 TOTAL LIABILITIES 567,612 565,587 537,297 535,188 NET ASSETS 54,790 2,078 56,868 34,176 2,408 36,584
EQUITY Contributed equity 31,603 31,603 31,603 31,603 Asset revaluation reserve h 8,278 968 9,246 - - Retained earnings c,e,f,g,h 14,909 1,110 16,019 2,573 2,408 4,981 TOTAL EQUITY 54,790 56,868 34,176 36,584 84
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 28 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) The following schedule sets out the adjustments to the balance sheets of the Group and Gold Corporation for the AIFRS comparative period balance sheet as at 30 June 2005. Group Gold Corporation 30 June 2005 30 June 2005 Note AGAAP Effect of AIFRS AGAAP Effect of AIFRS transition transition to AIFRS to AIFRS $000 $000 $000 $000 $000 $000 CURRENT ASSETS Cash and cash equivalents 19,070 19,070 17,962 17,962 Receivables 3,814 3,814 2,618 305 2,923 Precious metal leases 457,537 457,537 457,537 457,537 Inventories 168,470 168,470 142,859 142,859 Prepayments 503 503 433 433 Total current assets 649,394 649,394 621,409 621,714 NON-CURRENT ASSETS Investments accounted for using the equity method i 14,186 134 14,320 - - Other financial assets - - 21,603 21,603 Property, plant and equipment d,e 35,893 (1,828) 34,065 2,251 (1,623) 628 Deferred tax assets f 747 (87) 660 747 (87) 660 Intangibles d - 1,623 1,623 - 1,623 1,623 Total non-current assets 50,826 50,668 24,601 24,514 TOTAL ASSETS 700,220 700,062 646,010 646,228
CURRENT LIABILITIES Payables c 17,747 50 17,797 9,609 9,609 Interest-bearing borrowings 147,265 147,265 143,765 143,765 Current tax liabilities 71 71 71 71 Employee benefits g 1,748 (493) 1,255 1,228 (493) 735 Other liabilities 476,616 476,616 456,957 456,957 Total current liabilities 643,447 643,004 611,630 611,137 NON-CURRENT LIABILITIES Employee benefits 229 229 93 93 Total non-current liabilities 229 229 93 93 TOTAL LIABILITIES 643,676 643,233 611,723 611,230 NET ASSETS 56,544 285 56,829 34,287 711 34,998
EQUITY Contributed equity 31,603 31,603 31,603 31,603 Asset revaluation reserve h 9,703 265 9,968 - - c,e,f, Retained earnings g,h,i 15,238 20 15,258 2,684 711 3,395 TOTAL EQUITY 56,544 56,829 34,287 34,998 85
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 28 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS)
Notes to the reconciliations: (a) Reclassification of Revenue Under AIFRS, the gain or loss on disposal of property, plant and equipment is recognised on a net basis as a gain or loss, rather than recognising the gross receipts and cost of asset sales separately. As a result, an amount of $226,000 was reclassified from revenue to expenses for the financial year ended 30 June 2005 for the Group and $225,000 for the Corporation. There is no impact on net profit.
(b) Reclassification of Employee Benefits on-costs Under AIFRS, only salaries and superannuation are classified under employee benefits. All associated costs such as payroll tax, workers compensation insurance, FBT and associated staff costs are included under materials and services in the income statement. An amount of $1,005,000 was reclassified for the Group and $252,000 for the Corporation from employee benefits to materials and services in the income statement for the year ended 30 June 2005. There is no impact on net profit.
In the balance sheet, on-costs such as payroll tax and workers compensation insurance relating to employee entitlements are classified separately from annual and long service leave. An amount of $87,000 as at 1 July 2004 and $94,000 as at 30 June 2005 have been reclassified from employee entitlements to provision for employee on-costs for the Group. For the Corporation an amount of $53,000 as at 1 July 2004 and $54,000 as at 30 June 2005 have been reclassified from employee entitlements to provision for employee on-costs.
(c) Funds received from Government Under AIFRS, a grant received from Government is recognised as income over the periods necessary to match the related costs. Under AGAAP, a grant was recognised as revenue in the period in which it was received, regardless of the timing of the proposed expenditure. The Group received a grant of $245,000 from the WA Government in January 2001, for a feasibility study on the Northampton battery site, which was brought to account as revenue in that year. At 1 July 2004, the balance of funds remaining of $84,000 was reinstated as deferred income on that date with a corresponding charge to retained earnings. Expenditure of $34,000 against these Government funds was incurred during the year ended 30 June 2005. As at 30 June 2005, $50,000 was reinstated as deferred income with a corresponding charge to retained earnings for the Group. As a result, expenses for the year ended 30 June 2005 decreased by $34,000 for the Group. There was no adjustment for the Corporation. 86
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
28 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) (Continued)
Notes to the reconciliations (continued): (d) Reclassification of Computer Software to Intangible Assets Under AIFRS, computer software that is not integral to the operation of hardware is classified as an intangible asset. Under AGAAP, this was included under plant and equipment. This resulted in a reclassification of computer software of $273,000 as at 1 July 2004 and $1,623,000 as at 30 June 2005 from property, plant and equipment to intangible assets for both the Group and the Corporation. Computer software is considered to have a finite, useful life, and can therefore be amortised at the same rate as it was depreciated under AGAAP. An amount of $69,000, representing the depreciation charge on computer software for the year ended 30 June 2005 in the Group and the Corporation was reclassified to amortisation in the income statement. There is no impact on net profit.
(e) Relocation Costs Under AIFRS, costs of relocation of plant and equipment are not included in the carrying value of property, plant and equipment. Therefore relocation costs incurred in 2001-02 having a net written down value of $246,000 on 1 July 2004 can no longer be capitalised and have been written off to retained earnings. At 1 July 2004, retained earnings of the Group decreased by $246,000 with a corresponding decrease in property, plant and equipment. At 30 June 2005 retained earnings of the Group decreased by $205,000 with a corresponding decrease in property, plant and equipment. There were no adjustments for the Corporation. Depreciation costs of $41,000 for the year under AGAAP have been added back in the income statement for the year ended 30 June 2005 for the Group.
(f) Deferred tax assets On transition to AIFRS the balance sheet method of tax effect accounting has been adopted, rather than the liability method applied under AGAAP. Under the balance sheet approach, income tax on the profit and loss for the year comprises current and deferred taxes. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. The impact on the Group and the Corporation at 1 July 2004 of the change in basis and the transition adjustments on the deferred tax balances and the previously reported tax expense was an increase in deferred tax assets of $299,000 with a corresponding increase in retained earnings. The impact of the change on the deferred tax assets for the financial year ended 30 June 2005 was a decrease of $87,000 for the Group and the Corporation. As a result of the above, tax expense for the year ended 30 June 2005 increased by $386,000 for the Group and the Corporation. 87
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 28 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) (Continued) Notes to the reconciliations (continued): (g) Dividends Under AIFRS, a provision is made for the amount of dividend declared on or before the end of the financial year, but not distributed at balance date. If dividends are declared after the end of the financial year, but before the financial report is authorised for issue, the dividends are not recognised as a liability and are disclosed in the notes to the financial report. This resulted in a reduction in the provision for dividend for the Group and the Corporation of $2,109,000 at 1 July 2004 and $493,000 at 30 June 2005. The amounts were transferred to retained earnings. (h) Revaluation of Assets Under AIFRS, revaluation increments and decrements relating to revalued property, plant and equipment are recognised on an individual asset basis, not a class of assets basis. Under AGAAP, net revaluation decrement of $3,399,000 on all buildings was charged to retained earnings at 30 June 2004. Therefore, a revaluation increment of $1,383,000 relating to one building was transferred from retained earnings to revaluation reserve as at 1 July 2004. A deferred tax liability of $415,000 was recorded for the revaluation, with a corresponding charge to the revaluation reserve. The overall impact was an increase in revaluation reserve of $968,000, an increase in deferred tax liability of $415,000 and a decrease in retained earnings of $1,383,000. As at 30 June 2005, revaluation increment of $1,415,000 for buildings was credited to revaluation reserve under AGAAP. Under AIFRS, a revaluation increment of $985,000 was transferred from revaluation reserve to retained earnings. A deferred tax liability of $720,000 was recorded for the revaluation, with a corresponding charge to the revaluation reserve. The overall impact was an increase in revaluation reserve of $265,000, an increase in deferred tax liability of $720,000 and a decrease in retained earnings of $985,000. The overall impact of the above on deferred tax balances has already been considered in Note (f). As a result of the above, the tax expense for the year decreased by $305,000, as the deferred tax on the revaluation recognised in the revaluation reserve was directly debited to the revaluation reserve. (i) Investments accounted for using the equity method For the year ended 30 June 2005, AGR Matthey's operating statement included amortisation of goodwill expense. This was written back as required under AIFRS in the accounts of AGR Matthey. The Group's share of the write-back was $134,000, which had the effect of reducing its share of the loss from AGR Matthey for the year ended 30 June 2005 by this amount, with a corresponding increase in the value of the investment in AGR Matthey. 88
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
29 CHANGES IN ACCOUNTING POLICY In the current financial year the Group adopted AASB 132: Financial Instruments Disclosure and Presentation and AASB 139: Financial Instruments: Recognition and Measurement. This change in accounting policy has been adopted in accordance with the transition rules contained in AASB 1: First-time Adoption of AIFRS, which does not require the restatement of comparative information for financial instruments within the scope of AASB 132 and AASB 139. The adoption of AASB 139 has resulted in the Group recognising all derivative financial instruments as assets or liabilities at fair value. There was no effect of the change in the Group as at 1 July 2005 as the Group did not have any derivative financial instruments as at that date.
30 RELATED PARTIES During the course of its business, the Group conducts transactions with related parties. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with Related parties Aggregate amounts included in the determination of profit before income tax that resulted from transactions with each class of other related parties were as follows:
2006 2005 Supply of Precious Supply of Precious goods and metal goods and metal services lease fees services lease fees $000 $000 $000 $000 Amounts charged to related parties arising from normal trading activities AGR Matthey 127 2,400 167 1,152 Poongsan Perth Mint JV 2,751 - 6,134 -
Amounts charged by related parties arising from normal trading activities AGR Matthey 2,109 - 2,735 - Poongsan Perth Mint JV 2,489 - 5,662 -
Amounts receivable from or (payable) to related parties AGR Matthey 313 - (21) - Poongsan Perth Mint JV - - (36) - 89
GOLD CORPORATION AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
31 COMPARISONS OF ESTIMATES AND ACTUAL RESULTS
Section 42 of the Financial Administration and Audit Act requires statutory authorities to prepare annual budget estimates. Treasurer's Instruction 945 requires an explanation of significant variations between these estimates and actual results.
The Group's business plans for 2005/06 projected an operating profit before income tax of $3,920,000 compared to the actual profit of $7,273,000. The most significant variations were: - High levels of investor activity in Perth Mint Depository resulted in margins, transaction and other fees being favourable by over $2 million; - Sales of investment or bullion coins and bars were much higher than planned; and - Profit distribution of $2.8 million from AGR Matthey was 61% higher than budget
32 VARIATIONS FROM PREVIOUS YEAR
Treasurer's Instruction 945 requires an explanatory statement providing reasons for and details of any significant variations between actual revenue and expenditure for the financial year and the corresponding item in the financial statements of the immediately preceding year. The most significant variations were: Sales revenue and Trading Profit Sales revenue of $933 million in 2006, against $396 million in 2005, was higher by 136%, due to both higher metal prices and volumes resulting from increased investor interest in precious metals. Cost of sales, comprising mainly precious metals, was $143 million higher than in 2005, reflecting the significantly higher sales revenue. Trading profit of $26.7 million was $2.7 million, or 11.2% higher, than in 2005 due to the same factors.
Income from Joint Venture Partnerships Total income from the group's investment in joint ventures was $3.6 million higher than in 2005. Income from the investment in AGR Matthey was a profit of $2.8 million for 2005, compared to a loss of $641,000 in the preceding year. The group's share of the loss from Poongsan Perth Mint JV was $302,000 for the six months to 31 December 2005, compared with the loss of $496,000 for 2005.
Charges for Technical Services These were 90% lower than in 2005, most of which related to income earned from technical services charged to the Poongsan Perth Mint JV in 2005.
Expenditure Materials and services costs were 22% lower than in the preceding year. The majority of the variance related to the changed operational structure for production of coin blanks, following the termination of the Poongsan Perth Mint JV as at 31 December 2005.
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