IGN 3106 An.Report For

GNS ANNUAL REPORT 2004 WWW.GNS.CRI.NZ

GROUND BREAKING YOU CANNOT OVERSTATE THE CONTRIBUTION GNS PEOPLE HAVE MADE TO THE WORLD SCIENTIFIC COMMUNITY. A SMALL STORY: IN 1941, A GEOLOGIST WITH THE NEW ZEALAND GEOLOGICAL SURVEY, HAROLD WELLMAN, AND A COLLEAGUE WERE ON AN EXPEDITION IN SOUTH WESTLAND. THEY WERE LOOK- ING FOR MICA, A STRATEGIC MINERAL URGENTLY NEEDED FOR MAKING RADIO COMPONENTS DURING WORLD WAR II. They found it, and a mine was opened. But during their search, Wellman discovered something of much greater significance. He observed the Southern Alps were bounded on the west by a long straight fault line that splits the South Island in half. He traced the Alpine Fault for over 600 kilometres from the Fiordland coast to the Nelson lakes. Later, he recognised that strikingly similar rocks occurred in west Otago and northwest Nelson. He challenged conventions of the day by making the audacious suggestion that opposite sides of the Alpine Fault had moved apart by 480 kilometres.

This was a revolutionary hypothesis that played a significant part in the development of what we now call plate tectonics. Wellman’s contribution to that science is recognised worldwide.

That is just one story. There are many others of outstanding scientists who worked for the organisations that now make up GNS. They include Athol Rafter’s pioneering work in radiocarbon dating, Sir Charles Fleming’s work in paleontology, and Alexander McKay’s work in recognising active faults. It is no exaggeration to say that a surprisingly large amount of the world’s understanding of modern geology comes from work carried out in New Zealand. THAT GROUND-BREAKING RESEARCH, THAT SCIENTIFIC LEADERSHIP, CONTINUES AT GNS TODAY.

PAGE:01 GNS IS AT THE GLOBAL FOREFRONT OF NANOTECHNOLOGY, FOR EXAMPLE FILING WORLD-FIRST PATENTS FOR BUILDING STRUCTURES SO SMALL THEY CAN BE SEEN ONLY WITH AN ATOMIC FORCE MICROSCOPE. OUR SCIENTISTS ALSO CONTINUE TO PUSH FRONTIERS IN HYDROCARBON MODELLING, USING THEIR GEOSCIENTIFIC EXPERTISE (IN WHICH THEIR KNOWLEDGE OF PLATE TECTONICS PLAYS NO SMALL PART) TO HELP LOCATE UNTAPPED ACCUMULATIONS OF OIL AND GAS IN NEW ZEALAND’S COMPLEX SEDIMENTARY BASINS. FOR A RELATIVELY SMALL ORGANISATION FROM A SMALL COUNTRY, THE WORK GNS HAS DONE, AND CONTINUES TO DO, IS NO SMALL FEAT.

GNS AT A GLANCE 04 Key facts about one of New Zealand’s leading research and consultancy companies.

CHAIRMAN AND CEO’S REPORT 05 Con Anastasiou and Alexander Malahoff comment on the past year. Includes six-year trend charts showing revenue, expenditure and shareholders’ equity.

NON-FINANCIAL PERFORMANCE 10 Including relationships with universities, science education and promotion, working with Maori, environmental stewardship, and research output.

STAFF AWARDS 12 GNS is fortunate to have exceptional staff whose work is valued highly on many fronts. PAGE:02 MAIN RESEARCH FOCUS 13 COMMERCIALISATION 33 GNS’s main research activities. Generating revenue from our innovations.

SCIENCE HIGHLIGHTS 14 MANAGEMENT TEAM 34 Eighteen examples of our activities in Profiles of our senior managers. applied earth sciences and isotope technology. FINANCIAL STATEMENTS 35 HUMAN RESOURCES 26 Including report of the Directors, GNS’s employment policies summarised, as well as Board member profiles, comment on staff training, health and safety, corporate governance, auditor’s report qualifications, remuneration, diversity, and staff turnover. and financial statements.

COLLABORATIONS AND PARTNERSHIPS 28 DIRECTORY 55 Examples of alliances that enable GNS to excel in diverse fields of research and commercial enterprise. GNS BUSINESS GROUPS AND PRINCIPAL CAPABILITIES 56 PRINCIPAL SCIENTISTS 30 Profiles of our leading scientists. PAGE:03 GNS AT A GLANCE

The core purpose of Geological GNS’s activities enable Clients include New Zealand and and Nuclear Sciences (GNS) is to New Zealand to: overseas governments; oil and gas understand earth systems and exploration companies; physics-based technologies, and • identify and manage renewable geothermal and hydro electricity to transform this knowledge into and non-renewable geological operators; local and regional economic and social benefits for resources councils; the minerals exploration New Zealand. GNS’s vision is to • understand, manage, industry; the meat, dairy, wool, be a global leader in these fields. and mitigate the economic timber and horticulture GNS is New Zealand’s and social effects of geological processing industries; the leading provider of earth and hazards insurance and reinsurance isotope scientific research and • plan and manage sustainable industry; port companies; consultancy services. Established environments engineers and developers; as a Crown Research Institute • develop and benefit from museums, universities, and other in 1992, GNS operates as a stand- innovative physics-based research organisations. alone company. It has its own technologies. GNS has 274 staff based at Board of Directors and its offices in Lower Hutt, Wairakei, shares are held by the Crown. and Dunedin. Annual revenue The Company’s Maori name, of $39 million is generated by Te Pu- Ao, means the foundation, commercial enterprise and origin and source of the world competition-based government in its entirety from the atomic research grants. through to the cosmogenic levels. www.gns.cri.nz

PAGE:04 THE YEAR IN REVIEW

”Civilisation exists by geological consent, subject to change without notice”, William Durant, 1885-1981.

Geology stores the water, energy, and mineral reserves that underpin wealth, and geology creates the fertile valleys which host human settlement. Geology imposes the earthquakes, volcanoes, floods, tsunamis, and landslides that threaten our wealth and settlements. In New Zealand, it is GNS’s business to enhance access to this wealth, and to mitigate against the geological hazards that remove it. We are descended from organisations that have fulfilled this role for New Zealand since 1865. Here, we are pleased to report to our stakeholders on this latest year in our proud history of achievement.

CON ANASTASIOU, CHAIRMAN,

AUGUST 2004.

DR ALEXANDER MALAHOFF, CHIEF EXECUTIVE,

AUGUST 2004.

CON ANASTASIOU, Chairman. FAR RIGHT: DR ALEXANDER MALAHOFF, Chief Executive.

PAGE:05 THE YEAR IN REVIEW, CONTINUED

AFTER-TAX PROFIT Key areas of achievement in CROWN INVESTMENT IN A YEAR OF STEADY PROGRESS Year ended 30 June the field of energy have been RESEARCH FACILITIES AND in the search for new oil, CAPABILITIES In the past year, we enhanced 2,000 gas and geothermal reserves, the strength and number of and in demonstrating New GNS’s public good research our relationships with other 1,750 Zealand’s prospectivity in energy. revenue, won competitively organisations to produce Our geological hazards response from the Crown through FRST, excellence in science and to 1,500 systems have been well-tested comprises approximately 55 support New Zealand’s economic 1,250 by the Fiordland earthquake of percent of our revenue. This past growth. These include the August 2003 and the Manawatu- year was critical, with nearly half Memoranda of Understanding 1,000 Wanganui floods of February that research revenue at risk. signed with government research 000 $ 2004. Our contribution to under- While initial decisions in both the organisations in South Korea and 750 standing climate change has been isotopes and hazards areas were Chile. Closer to home, our strong rewarded by New Zealand and highly disadvantageous for GNS, relationships have enabled us 500 overseas agencies investing in our position was ameliorated as a to make major advances in a an ambitious drilling project in result of subsequent negotiations. number of our core science areas. 250 Antarctica. Our contribution The main outcome was the Examples are highlighted below, to mitigating climate change recognition that New Zealand’s and in more detail on pages 14 0 is reflected in our partnership fundamental research capabilities, to 25. 1999 2001 2002 2003 2004 2000 with Australian organisations and its major research facilities, to capture and store carbon can be endangered by the existing RENEWED ENERGY EXPLORATION Budget dioxide. Our prestige in blue skies investment processes. We are IN NEW ZEALAND Actual science has been acknowledged pleased to be at the forefront of through Marsden research grants developments aimed at addressing The impending demise of the and awards and honours won by these issues with the Ministry of Maui gas field has triggered our staff. The Crown Research Research, Science & Technology renewed exploration activity Institutes Act 1992 requires (MoRST) and FRST. in New Zealand. As players chase us not only to carry out such One fundamental issue is new discoveries, they invariably scientific research and technology whether the competitive funding come to GNS for expert transfer for the benefit of New processes can recognise and knowledge and specialist services. Zealand, but also to maintain underpin the stability needed to GNS’s wide range of commercial our own financial viability. develop and maintain science data products provides the capabilities. It is in keeping with industry with immediate access REVENUE FINANCIAL RESULT the “whole of government” to high-quality prospectivity Year ended 30 June concept to have good alignment data to guide their risk analysis

25,000 GNS achieved an after-tax profit between the strategies of science and investment decisions. of $1,398,000 for the year to organisations and FRST. GNS research shows there 30 June 2004, against $1,666,000 It is in the public interest for is significant potential for

20,000 in the previous year. This represents science organisations not to North Sea-scale oil and gas an after-tax return on equity of relinquish nationally significant fields not only off the coast of 9.3 percent (2003: 11.9 percent). capabilities (some taking up to Taranaki, but also off the west

15,000 Total revenue from research, 20 years to build) in response coast of Northland where, consulting and other operations to investment decisions made using reprocessed seismic data,

000 was $39.4 million (2003: $37.2 by agencies that fail to recognise we have identified up to 30 $

10,000 million). Expenses were $37.2 the importance of maintaining possible drilling targets. million (2003: $34.7 million). these capabilities. Accordingly, Five of these targets are about Shareholders’ funds at 30 June we are pleased that MoRST and 100 square kilometres in area –

5,000 2004 stood at $15.6 million FRST are recognising these issues, approaching the size of the giant (2003: $14.5 million). While with increased funding for science Maui gas field. The work was overall revenue has increased capabilities as announced in the part of a joint venture involving

0 by 41 percent since 1998, Government’s 2004 budget. GNS, British-based Spectrum revenue from the Crown, Resources, and government 1999 2001 2000 2002 2003 2004 including the Foundation for agency Crown Minerals. Research Science & Technology With the Northland Basin Public good science revenue (FRST), has increased by only open for licensing this year, Revenue from other sources 6 percent over the same period. GNS’s detailed prospectivity report is enabling exploration

PAGE:06 companies to confidently of future events, and used high- Stadium every three seconds. REVENUE/FTE evaluate the acreage on offer. precision GPS to measure the Huge breakout floods of this scale Year ended 30 June Stimulated by the winter total shift of the land at the earth’s have occurred twice in the central 160 electricity crisis of 2003, surface. About 5000 aftershocks North Island in the past 27,000 dwindling natural gas reserves, were recorded in the first five years. Smaller events occur more 140 and concerns about hydro months after the main shock. frequently. The 1953 Tangiwai capacities and lake levels, there Combined with the GPS lahar from Ruapehu’s Crater Lake 120 has also been an increase in the information, these data will is the most recent example. level of geothermal exploration enable seismologists to accurately 100 and development work for our reconstruct the fault rupture SOLID GROWTH CONTINUES FOR geothermal team at Wairakei. at depth. We also expect the NOVEL SCANNING EQUIPMENT 80 000 We have provided specialist information and analysis will $ consultancy services for a number yield significant knowledge of the GNS IsoScan’s programme to 60 of activities, including drilling state of stress among adjacent develop and commercialise novel new wells at Rotokawa, Mokai, faults in southwest New Zealand. scanning applications for industry 40 and Putauaki near Kawerau, The building of the GNS continues to strengthen. Its joint along with feasibility studies for New Zealand landslide database ventures with partners in the 20 Maori land-owners. We have also has made solid progress in the wood processing and food 0 been providing advice for consent past year and it is producing industries have begun to sell 1999 2001 2002 2003 2004 hearings and subsidence issues. valuable hazard information. scanners in domestic and overseas 2000 Comprising both prehistoric and markets. TrueView, the joint LARGE QUAKE A ROBUST TEST recent landslides, the database venture in wood processing, FOR OUR SYSTEMS enables the production of land- has sold 11 of its Surveyor slide hazard curves that determine LDS 200 scanners into Australasia, The magnitude 7.2 Fiordland the absolute and relative and is poised to launch into earthquake on 22 August 2003 frequencies of landslides of North and South America. was New Zealand’s largest quake a specified size, in a specified time MeatVision, the joint venture in since 1968, and the first major period, and in a specified terrain. food processing, has established quake to occur since the start The North Island is divided an arrangement with a US-based of the GeoNet project in 2001. into 12 landslide terrains based manufacturer and distributor to It was, therefore, a robust test on geology and topography. market the gauge on a worldwide EXPENDITURE Year ended 30 June of our new monitoring and GNS geologists have calculated the basis. Both joint ventures have communications equipment, absolute landslide hazard for each several more novel developments 20,000 our systems, and our staff. terrain type. The database is useful on the horizon. All performed well, and we for hazard and land use studies. were able to disseminate Sobering facts about Taupo’s POUNAMU ASSESSMENT accurate preliminary information destructive potential have PROJECT ON TRACK 15,000 within an hour of the earth- emerged from a computer quake occurring. reconstruction of the Oruanui Working closely with Ngai Tahu, The event was an excellent eruption of 26,500 years ago GNS is building an inventory 10,000 illustration of New Zealand’s which triggered a 60 cubic of pounamu (greenstone) re- 000 $ growing capability to continuous- kilometre flood, and formed the sources in the lower South Island. ly monitor earth processes over lake in what is essentially its The project, now in its second large areas. The large amount modern configuration. The post- year, has met all its first-year of high quality data captured in Oruanui lake was 140m above objectives. It will enable Ngai 5,000 Fiordland has been particularly its present level. However, Tahu to manage pounamu useful for follow-up research. a “breakout flood” resulted in the resources sustainably. A corner- It has led to a revision of our lake level dropping 80m in a short stone of the project is the 0 models of expected ground period. The volume of water measurement of the total 1999 2001 2002 2003 2004 shaking for large earthquakes released down the Waikato River pounamu present in the Ngai 2000 in the southern part of the was enough to cover the entire Tahu region. The study also South Island. We deployed nine North Island to a depth of 50cm. looks at how erosion and other Expenses portable seismometers near the The water had enough force geological processes will affect (excluding remuneration and depreciation) epicentre within 36 hours of the to shift 11m-high boulders its availability. This work will help main shock to record aftershocks. 80km downstream. At its peak, determine appropriate extraction Depreciation We also surveyed the extent and the flood released enough water rates. Initial studies in the Capital expenditure nature of landslides for modelling to fill Wellington’s Westpac Wakatipu region have resulted

PAGE:07 THE YEAR IN REVIEW, CONTINUED

SHAREHOLDERS’ EQUITY in a GIS database and a theoretical Japanese submersible, Shinkai The three successful GNS Year ended 30 June model showing distribution 6500, to explore two submarine projects will investigate how and sensitivity of the resource. volcanoes northeast of White plants coped with prehistoric 16,000 As well as GNS and Ngai Island in the Bay of Plenty. global warming, when and how Tahu personnel, the project Our scientists plan to dive up to plants and animals colonised 14,000 involves specialists from Otago two kilometres to capture video the Chatham Islands, and what University’s Geology Department. footage and new knowledge about causes earthquakes to “cluster” 12,000 geology, mineral resources, and in a particular area.

10,000 BIG ANTARCTIC PROJECT marine life within New Zealand’s GETS UNDERWAY Exclusive Economic Zone. SCIENCE OUTREACH 8,000 In March 2005, GNS will survey 000 $ New Zealand is set to embark up to 10 more submarine GNS sees the public of 6,000 on its most ambitious scientific volcanoes in the Kermadec Arc New Zealand as one of its key project in Antarctica. GNS is using the US research submersibles stakeholders. We maintain our 4,000 playing a leading role in the Pisces IV and Pisces V and an links with the public through international climate change study unmanned remotely-operated our media releases, our website, 2,000 – ANDRILL (short for Antarctic vehicle (ROV). Samples collected and our partnership with Te Papa drilling project). The aim is to during these dives will provide Tongarewa, the Museum of 0 extract seabed sediment cores New Zealand with detailed New Zealand. This partnership from two drill sites to find out knowlege of the chemistry of ore- also benefits Te Papa as an 1999 2001 2000 2002 2003 2004 more about the behaviour of the forming and life-nurturing fluids organisation, with our provision Antarctic climate during the past issuing from the seafloor, and the of authenticity to its earth science 15 million years. Around this era, unique biological communities exhibits. As a recent initiative, Antarctica had no ice sheet, and and mineral deposits that result we are investigating how we the climate and vegetation were from this discharge. can support science teachers, similar to South Westland’s today. Knowledge acquired during as an effective link to young A New Zealand company is this deep-sea exploration may New Zealanders. developing a revolutionary have long-lasting implications drilling platform needed to extract for New Zealand. It may lead MAORI NAME the cores from beneath the to new foods, new chemicals, floating ice shelves in the southern advanced pharmaceuticals, We wish to thank the erudite RETURN ON EQUITY McMurdo Sound region. economic minerals, and new panel convened to help the Year ended 30 June The project has a budget of sources of energy. Any one of development of a Maori name, - 14 $40 million. About $20 million these would be enormously Te Pu Ao, for GNS. We are will cover logistics and operations, beneficial for future generations now developing our visual with the balance covering research of New Zealanders. More than brand identity to incorporate 12 costs. Funding is being provided 90 percent of the New Zealand this name as a declaration by the four participating countries continent lies offshore, and GNS of our intentions to care for 10 – New Zealand, the United States, is leading the way in gaining new the aspirations of Maori. Germany, and Italy. Drilling is knowledge of this vast area. 8 scheduled to start in the summer BOARD CHANGES of 2006/07. ANOTHER STRONG Percent 6 MARSDEN RESULT Associate Professor Michael GNS LEADS THE WAY IN Walker’s six-year term on our 4 OFFSHORE EXPLORATION GNS maintained its excellent Board of Directors ended in June. track record by securing funding We valued his wisdom and his

2 In November this year, we will of $1.39 million from the govern- sound understanding of science get our first look at seafloor ment’s Marsden Fund for three imperatives. We thank him for his hotsprings, rare marine new science projects in the year excellent service to GNS and his 0 organisms, and spectacular in review. On a per-head basis, contribution to the progress we 1999 2001 2000 2002 2003 2004 geological formations on the GNS continues to be the most made over that time. We welcome ocean floor off New Zealand’s successful of the nine Crown his replacement, Dr Ellen Förch, Return on equity (ROE) coast. It will be the culmination Research Institutes at securing who is Director of Research Weighted average cost of nearly a decade of exploration Marsden research funding. Advancement at the University of capital (WACC) from surface ships. A joint In the 2003 round, just 14 percent of Auckland. Budget (ROE) Japanese-New Zealand project of the 741 applications to the will see researchers using the $44 million fund were successful.

PAGE:08 AWARDS • consolidating the bulk of our We have made substantive progress operations on a single site. towards the achievement of these The Company was delighted objectives. This is shown by: to perform with distinction in a Specific objectives include the number of major awards during following: • our leading the New Zealand the year. In the Annual Report membership, with Genesis and Awards competition, conducted • formation of a national Solid Energy, in the Australian by the Institute of Chartered petroleum centre to lead CO2CRC research partnership Accountants of New Zealand, research on New Zealand’s to sequester carbon dioxide GNS was awarded a commend- hydrocarbon resources in the earth’s crust ation in the “Other Companies” and subterranean CO2 • the scheduling in this new section. The 2003 GNS Annual sequestration financial year of two deep Report also won a Grand Award • exploration of the deep ocean submersible dives with and a Gold Award in the science of the EEZ for petroleum, international partners and technology category of the minerals, and benthic habitats • the completion of the first stage ARC International Awards. • formation of a facility for in building our geomicro- This prestigious New York- paleoclimate research to biology laboratory at Wairakei based event honours outstand- provide data and interpret- • the purchase of a new building ing achievement in annual ations for global climate at Avalon, Lower Hutt. report design. modelling In addition, the Company • ongoing development of our IN CONCLUSION won IT industry recognition geomicrobiology capability, for creativity and innovation conducting research into The science activities undertaken in the development and use of microbe-metal-rock interactions by GNS hold the key to creating, its geological databases. In the • further commercialisation enhancing and protecting the 2004 Computerworld Excellence of IsoScan products quality of life. These activities also Awards, GNS was runner-up • development of nanotech- provide the knowledge required in the “Use of IT in Government” nology science and industrial to create strategies to protect this category. This is the second prototypes wealth and this quality of life. year in succession that GNS • procurement of full funding for GNS is committed to achieving has achieved a high placing in the GeoNet geological hazard these outcomes for the benefit these awards. monitoring system of both the Company and its • leadership in the delivery of stakeholders. STRATEGIC DIRECTIONS natural disaster loss-modelling to the insurance industry We are maintaining the strategic • determination of the potential directions we set last year. These for losses from a Wellington- will continue the development region earthquake, arguably of GNS as a robust, vibrant, the greatest natural hazard to and responsive New Zealand which New Zealand is exposed organisation with an ability • hosting an earth science to grow and to grasp new graduate school in partnership opportunities as they arise, by: with universities.

• maintaining nationally These are demanding objectives important capabilities, facilities, which carry some business risk. and information systems However, we are confident this • enhancing our public good risk can be managed effectively. science The achievement of any one • enhancing our commercial of these objectives has the applications capability to provide substantial • integrating Maori interests step-growth, intellectually into our activities and financially, both for GNS • recognising and rewarding staff and for New Zealand. appropriately

PAGE:09 NON-FINANCIAL PERFORMANCE

RESEARCH OUTPUT GNS staff give talks to schools STAFF INVOLVEMENT IN and we host school visits to SUPERVISING STUDENTS For the year in review, GNS our sites. Geologist Hamish produced 120 refereed science Campbell, who spends up publications, 71 conference papers to 40 percent of his time with and abstracts, four research outreach activities, gives an monographs and maps, 171 client average of three presentations reports, and 27 technical reports. a week to groups ranging from NZ universities Total Some conference papers are business forums to Probus clubs. universities Overseas published in scientific journals, Staff 33 10 39(1) while others are published by RELATIONSHIPS WITH conference organisers and all are UNIVERSITIES usually available to the public. Students(2) 42 13 55 Our client reports are produced We continue to maintain strong as part of commercial contracts collaborative activities with Supervision 2,952 1,164 4,116 and are confidential to the client. universities, with most of our hrs/yr Technical and science reports core research programmes cover a wide range of topics and having university subcontracts. Time cost 385 153 538 are available for sale from GNS. GNS funds 16 postgraduate $000/yr Our monographs and maps, scholarships ranging in value from Direct cost 269 51 320

which are major scientific $7500 to $32,000 per student per $000/yr undertakings, are also available year. Other involvement includes: for sale from GNS. A list of Total cost 654 204 858 our publications and maps is • About 160 contact hours $000/yr on our website, www.gns.cri.nz per year for staff to present

lectures and seminars (1) Some staff are supervising more SCIENCE EDUCATION AND • Staff mark about 18 student than one student, and some are supervising sudents both in PROMOTION theses per year. New Zealand and overseas.

(2) Not including 3 GNS staff members A highly successful initiative In addition, GNS is involved who are studying for degrees. is our relationship with Western in the MacDiarmid Institute Heights High School (WHHS) for Advanced Materials and in Rotorua. GNS and WHHS Nanotechnology with Victoria have developed an innovative and Canterbury Universities, science project to monitor the and with Industrial Research Ltd. quality of lake and river water in the Bay of Plenty. Called the WORKING WITH MAORI Kaituna Project, it is the brain- child of WHHS science teacher GNS continues to develop long- Murray Pearce. It involves term and mutually beneficial students working with GNS relationships with Maori organ- scientists to collect water samples isations. Our Minerals, Petroleum, from 15 sites in Bay of Plenty. Mapping, Geothermal, and The samples are analysed in Hazards research programmes the field and later at GNS’s each have components designed laboratory at Wairakei, near to deliver science outputs relevant Taupo. The project has been to iwi, Maori landowners, and highly successful in giving the local communities. During the students practical experience past year, GNS has worked relevant to Level 3 NCEA closely with Te Whare Wananga subjects of science, geography, o Awanuiarangi, a Maori chemistry, and biology. Its success university in Whakatane, to help has resulted in requests from them build their capacity in earth other schools to participate. and environmental sciences.

PAGE:10 Aside from guest lecturing and We are scrupulous about the GNS ONLINE short-course teaching, GNS is siting and standards of installation also looking to extend wananga of the geological monitoring This initiative, now in its fifth studies into emerging fields of instruments we operate. year, involves bringing together science. GNS took a wananga We respect private property disparate databases and student on a research voyage rights and always reach agreement combining them into an to the Tonga-Kermadec Arc with owners before entering integrated, company-wide in September 2004. Discussions land for scientific research. database. In the past year, are underway to establish a shared GNS scientists who work much of our data has become research facility to help in the in Antarctica comply with more visible to GNS staff and development of further research international environmental to the outside world. This has collaboration between the two protocols. In all our field work, been achieved through the use organisations. we aim to strike a balance of Geographic Information GNS has been working closely between strong environmental Systems and web delivery. with the Federation of Maori values and the technological, For example, the Petrology Authorities (FOMA) to promote economic and social developments database continues in its research and development into to which New Zealanders aspire. expansion and enhancement, minerals and geothermal resources and now involves collaboration on Maori land. This greater focus GNS WEBSITE with earth scientists from beyond on resource development has seen GNS. Fossil data have become GNS complete several research The GNS website – much more readily available, projects with Maori landowners www.gns.cri.nz – continues and the wider community can in the Hauraki, Bay of Plenty, to be very popular and is a great now also access active faults data. and Taupo regions. GNS looks source of information for students GNS Online continues to forward to further research of all ages. More of our databases provide an increasing number projects in these areas, as well have become available on line. of services to aid GNS staff in the as further collaboration with Among these is PDQMap, routine administration of their FOMA and other development an information service for the daily work. advocates. oil and gas exploration industry. GNS recently supported It offers a huge range of CLIENT SATISFACTION the inaugural Tohu Putaiao information about petroleum Rangahau Wananga, hosting 50 fields and licence areas. GNS regularly surveys clients postgraduate science students Nearly 1000 people subscribe to measure the quality of our from throughout New Zealand. to our “Geobullets” email group. services. We ask clients to rate us With other CRIs, GNS organised They receive regular updates, on delivering what was asked for, a Careers Expo at Victoria including the latest earthquake meeting deadlines, the quality University for Maori post- alerts, press releases, job vacancies, of our work, our ability to graduate science students. conference reports, and new manage changes to the brief, publications. The website features staff availability, and value for ENVIRONMENTAL POLICY an outline of GNS’s research money. During the past year programmes, along with results survey results were strongly Field work is vital to earth science from the previous year. positive. However, where clients organisations. Some of our field Within the first few hours of identify problems, GNS moves work is environmentally benign, any significant (magnitude 5 promptly to remedy them. such as measurement of volcanic and above) on-land earthquake, and geothermal gases. Other our website typically receives field work – studies of faults and in excess of 40,000 hits as people collecting drill cores – involves log on to find out the size and some ground disturbance. Where location of the quake. we disturb ground to study a geological feature, we restore the site and replant appropriate vegetation before leaving.

PAGE:11 CREDIT WHERE CREDIT’S DUE AT GNS, OUR CREDIBILITY RESTS ON THE PERFORMANCE AND REPUTATION OF OUR RESEARCHERS AND THEIR WORK. WE ARE PRIVILEGED TO HAVE EXCEPTIONAL STAFF WHOSE WORK IS RECOGNISED INTERNATIONALLY AND HAS MADE A MAJOR CONTRIBUTION TO THE WORLD’S UNDERSTANDING OF EARTH SYSTEMS. THIS YEAR, SEVEN OF OUR STAFF WERE RECOGNISED FOR THEIR OUTSTANDING CONTRIBUTIONS TO EARTH SCIENCES, AND WE ARE DELIGHTED TO ACKNOWLEDGE THEM.

PAGE:12 AWARDS AND MAIN RESEARCH CASE HONOURS FOCUS STUDIES

Ursula Cochran: awarded the GEOLOGICAL HAZARDS EARTH AND OCEAN RESOURCES OUR ACTIVITIES DEMONSTRATE 2004 Zonta Science Award. AND TECTONICS FOR ECONOMIC GROWTH LEADERSHIP IN EARTH SCIENCES Presented every two years to AND ISOTOPE TECHNOLOGIES a woman scientist who has • New Zealand’s structure, • Evaluating the petroleum excelled in pure and applied deformation, and tectonics potential in known sediment- Examples of our research and sciences, has excellent com- • Strong earthquake processes ary basins and identifying consultancy work feature on the munication skills, and is a good and earthquake-resistant design prospective frontier areas following 12 pages. role model for young women. and construction • Investigating the sequestration • Seismic and geotechnical of carbon dioxide in deep GNS is: Roger Cooper: awarded engineering geological formations a New Zealand Science and • Understanding geological • Sustainable management • a world centre of excellence Technology Silver Medal for hazards and mitigating their of geothermal and mineral for research into earth systems his exceptional contribution impact on society resources science to knowledge of the origin • Antarctic geological structure • Exploring the seabed in • the first port-of-call for and structure of New Zealand’s and tectonics. New Zealand’s Exclusive knowledge about plate oldest rocks. Economic Zone to identify boundary phenomena and their Cornel de Ronde: awarded ENVIRONMENT AND LAND USE economically significant socio-economic implications Science Communicator of the mineral, biological, and and opportunities Year Award for 2003 by The New • Geological mapping and spatial chemical resources • excellent at transferring Zealand Association of Scientists. information in New Zealand • Understanding the physiology knowledge to decision-makers • Origin and development and biochemistry of New • the New Zealand government’s Ben Morrison: awarded the of New Zealand’s continental Zealand’s diverse populations main earth systems research Kingma Prize for technical support. crust of heat-resistant (thermophilic) provider and adviser Simon Nathan: awarded • Geological time, paleoclimate, micro-organisms • an active collaborator with a New Zealand Science and and paleobiodiversity in • Understanding and protecting public and private sector Technology Bronze Medal for New Zealand and Antarctica groundwater resources. organisations worldwide his significant contribution • Quaternary and older • New Zealand’s national centre to New Zealand geology. environments and ISOTOPE TECHNOLOGIES FOR for isotope sciences and environmental processes. INDUSTRY AND SCIENCE technologies Rupert Sutherland: Visiting • a centre of excellence for Associate award at Caltech’s • Non-invasive scanning and innovative application of Department of Geological and measurement for optimising physics-based technologies. Planetary Sciences. The award industrial products and is made to facilitate research processes collaborations with Caltech • Understanding sources, rates, scientists. Rupert spent five and processes in earth and months at Caltech (Pasadena, USA) environmental sciences working with Michael Gurnis • Nanotechnology and ion beam and Joann Stock on the analysis for industry development of New Zealand • Rare isotope measurements and global plate tectonics. for dating and tracing studies. Andy Tulloch: awarded the Hochstetter Lecturer for 2003. This is awarded to a leading geo- logical researcher who is under- taking new and stimulating work.

URSULA ROGER CORNEL BEN SIMON RUPERT ANDY COCHRAN COOPER DE RONDE MORRISON NATHAN SUTHERLAND TULLOCH

PAGE:13 # 01: TASMAN GLACIER PROJECT WHERE DO YOU GO TO FIND OUT WHAT NEW ZEALAND’S CLIMATE WAS LIKE DURING THE PAST 500 YEARS? WELL, IF YOU’RE WITH GNS, THE ANSWER IS ‘ TO CONSIDERABLE DEPTHS’ .

PAGE:14 # 01: They also contain records of help explain a range of geological GLACIER ICE – climate responses such as rainfall, phenomena seen at the surface. temperature, and wind strength. The project, led by GNS, A CLIMATE TIME New Zealand’s Southern Alps includes researchers from CAPSULE and the Andes provide the only The University of Leeds, mid-latitude glacial records Hokkaido University and Four years’ planning comes in the Southern Hemisphere. Victoria University of Wellington. to fruition this spring, with GNS The international climate research Typical spacing of permanent researchers leading a multi- community is looking to climate seismic instruments in the national project to collect a deep records from New Zealand and GeoNet network is about 100km ice core from the top of the Antarctica to answer questions over much of the central North Tasman Glacier in the Southern about the role of the Southern Island. This is inadequate to Alps. The 200m-long ice core will Hemisphere in global climate. decipher the structure of the plate fill a much needed requirement Cyclonic weather patterns that interface at depth in fine detail. for mid-latitude climate records circulate around Antarctica have The temporary deployment, to help international researchers as much influence on our climate with spacing of 15km to 20km, better understand global climate as the tropical systems that bring has provided a much clearer view patterns over the past 500 years. El Niño and La Niña climate of the subduction zone. The project places GNS patterns to New Zealand. During the six-month deploy- in a unique position to make Improving our understanding ment, the instruments recorded a major contribution to inter- of our past climate puts us in 5000 earthquakes in the central national climate research. a better position to plan for the North Island. The rich data In collaboration with a team consequences of future climate source has allowed earth scientists from the University of Maine, change, such as drought, storms, to address a range of fundamental the researchers aim to recover floods, and water shortages in questions about the North about 200m of ice in one metre our hydro lakes. Island’s crustal structure. It is sections from the Tasman Glacier. also leading to more accurate determinations of earthquake Analysis of the recovered ice # 02: core will enable researchers to locations and magnitudes in compile a detailed reconstruction IMAGING THE the North Island. of New Zealand’s climate during SUBDUCTION ZONE The data have allowed the past 500 years. Analytical researchers to identify previously unknown structural anomalies techniques will include four Our understanding of the in the upper mantle. Preliminary different isotope measurements, subduction zone beneath the analysis suggests these anomalies and the study of volcanic ash central North Island has grown govern the distribution of layers (tephra), pollen grains, substantially thanks to deploy- volcanism in the North Island. and diatoms. ment of a dense array of seismic In particular, the data provide an Glaciers hold detailed and instruments. Data obtained from explanation for why there is no systematic records of climate 74 portable digital seismographs volcanism south of Mt Ruapehu. and environmental conditions. have given researchers exception- Analysis of the data continues In particular, they hold records ally clear three-dimensional and is expected to produce of climate-forcing agents images of the crust and mantle multiple downstream benefits for such as CO2, CH4, dust, deep under the North Island. seismological and volcanological aerosols, and solar irradiance. These unprecedented images hazards research in New Zealand.

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# 01 TEAM LEADERS: # 02 TEAM LEADERS: UWE MORGENSTERN, MARTIN REYNERS, Seismologist, Isotope Scientist, and T I M N A I S H , and D O NNA EBERHART- Paleoclimate Scientist. P H I L L I P S , Geophysicist.

PAGE:15 # 03: is one from the Taupo Volcanic hydrothermal system beneath A MORE RESILIENT Zone. It could be expected the volcano’s cone. to cause minor damage in They have also identified major WHAKATANE Whakatane. structural tectonic features to With its national earth science the east and west of Ruapehu. A recently completed GNS databases, GNS is able to compare These features are in the same earthquake hazard study of the the impacts of natural hazards, vicinity as earthquake clusters Whakatane urban area is expected such as earthquakes, volcanic that preceded Ruapehu’s 1995 to help reduce losses from future eruptions and tsunamis in its eruption. Researchers are earthquakes. Environment Bay studies, enabling a council and using advanced analysis of this of Plenty, who commissioned other parties to plan for ways information to identify structures the study, will use the information to mitigate potential damage. at greater depth, particularly to assess the likely impact of features that may influence different strength earthquakes eruption behaviour. The magneto- on the local infrastructure and # 04: telluric method is also proving to plan mitigation measures. its worth in probing geothermal Whakatane’s geological setting NEW INSIGHTS INTO fields to find out more about their is unusual in a world context. THE EARTH’S INTERIOR structure and size. It sits at the edge of a large Magnetotellurics is sometimes zone of rifting and volcanism – GNS researchers are setting the used to complement conventional the Taupo Volcanic Zone. pace internationally by using seismic techniques, with the It is also within a broad belt of an electrical imaging technique combined results usually much onshore faults that stretches from to find out more about the better than either technique alone. Wellington and enters the sea structure of the earth’s crust. The portable equipment takes at the Bay of Plenty coast. Called magnetotelluric surveying, about two hours to deploy and The town is built over an active it involves measuring the electrical is left unattended for up to three fault – the Whakatane Fault – properties of rocks. The technique days to record signals that are and is adjacent to a river that is capable of revealing structures later processed and analysed. has the potential to flood. 30km or more below the surface, Under Whakatane are loosely and is particularly good for compacted river sediments identifying underground fluids, prone to liquefaction in strong magma, molten rock, and major earthquake-shaking. geological structures. The worst case scenario for the In collaboration with Tokyo town would be the Whakatane Institute of Technology and Fault rupturing, with the western Victoria University of Wellington, side of the fault dropping by GNS researchers have recently a few metres, taking out the access used the technique to probe the bridge and allowing the river structure of Mount Ruapehu. to flow in. However, such an They collected data at 22 sites earthquake would be an along a 60km line passing infrequent event that might through the summit of Ruapehu. occur every 1500 to 2000 years. These data have enabled them A more common earthquake, that to identify acidic water from the might occur every 50 to 100 years,

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# 03 TEAM LEADERS: # 04 TEAM LEADERS: DICK BEETHAM, Engineering Geologist, H U G H B I B B Y , Geophysicist. and G RANT DELLOW, and S T E W A R T B E N N I E , Geophysicist Engineering Geologist.

PAGE:16 # 05: # 06: An outline of where New ORDER FROM CHAOS ACTIVE FAULT Zealand’s active faults are located, and photos of how to recognise GUIDELINE a fault in the landscape, are also An investigation of prehistoric included. earthquake activity on 23 active GNS has led the development GNS planner Janine Kerr faults in the Taupo Volcanic Zone of guidelines to help land-use and geologist Russ Van Dissen has confirmed that rupture on planners working in areas on compiled the guide in association individual faults is more organised or close to active faults in with authors from the Ministry than it first appeared. Many faults New Zealand. The guidelines for the Environment, the experienced long periods of aim to help territorial authorities Geological Society, the New quiescence interspersed with high minimise hazard risk and the Zealand Society of Earthquake earthquake activity. While quake time it takes for individuals, Engineering, BRANZ, and the activity on any one fault can look communities and the government Earthquake Commission, chaotic, a more systematic pattern to recover from fault rupture. along with local authority emerges on a regional basis. New Zealand’s precarious planners in Wellington. This order arises because the location at the edge of two plate tectonic forces driving the converging tectonic plates means faults are constant and because most people will experience the faults interact. earthquake-shaking, liquefaction, Conducted by geologists fault rupture, volcanic eruptions, Kelvin Berryman, Pilar Villamor, landslides or land deformation. Andy Nicol and Russ Van Dissen, Living close to an active fault that the study cut trenches across ruptures during an earthquake 23 faults south of Rotorua to means the degree of damage is document their earthquake amplified enormously, resulting history. Trench walls revealed in heavy financial losses and 30,000 years of evidence for potential loss of life. multiple earthquakes. Available from the Ministry The Taupo Volcanic Zone for the Environment, the guide is one of the best places in the Planning for Development of world for this type of study Land on or Close to Active Faults because of the abundance of outlines what local authorities well-documented ash layers from can do to avoid or manage volcanic eruptions, which help development in areas of active to date prehistoric earthquakes. faulting. It includes basic Five ash layers were common principles for planning to 80 percent of the trenches. approaches, easy-to-understand Improving our understanding information about earthquakes of active fault behaviour on and fault rupture, examples of a regional basis will enable us fault hazard maps, and ways to to better understand earthquake approach policy development hazards New Zealand-wide. in areas subject to fault rupture.

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# 05 TEAM LEADERS: # 06 TEAM LEADERS: KELVIN BERRYMAN, Geologist, JANINE KERR, Hazards Analyst, and P I L A R V I L L A M O R , and RU S S V A N D I S S E N , Geologist. Geologist

PAGE:17 # 07: SMALL WONDER SILICON NANOWHISKERS. ONE DAY THEY WILL HELP MAKE COMPONENTS FOR SUPER- COMPUTERS, PORTABLE BIOSECURITY SNIFFERS, PORTABLE X-RAY MACHINES, AND SUPER-BRIGHT LIGHT EMITTING DIODES. THEY’RE DEVELOPED BY GNS, AND 400 MILLION OF THEM WILL FIT ON THE HEAD OF A PIN. THIS IS BIG. VERY BIG.

PAGE:18 # 07: Two new ion implanters installed About the same time, SMALL WONDER at GNS’s National Isotope Centre Upper Hutt began experiencing in Lower Hutt during the past year a swarm of small to moderate have enabled the nanotechnology earthquakes – a rare event GNS has developed world programme to make further in Wellington. leadership in building atomic- advances. The GNS team is Modelling by GNS scientists scale nanostructures for use in moving closer to making and shows the quake swarm and the the next generation of electronic analysing nanostructures in situ. surface movement appear to be devices. An example is nano- GNS works closely with a linked. Scientists believe whisker silicon, a revolutionary range of organisations, both in the two tectonic plates, colliding atomic-scale material. Within New Zealand and internationally, 25km under the Kapiti Coast, the next three years, the GNS to further its nanotechnology slipped past each other by 50cm nanotechnology team plans programme. in less than one year without to produce a portable x-ray causing a damaging earthquake. prototype based around a panel The Upper Hutt swarm repre- of nanowhiskers. It will consume # 08: sented stress changes in the significantly less electricity than GPS EQUIPMENT rocks surrounding the slow slip conventional x-ray machines UNCOVERS RARE event. The change in stress regime and will run on batteries. could heighten the probability PHENOMENA Other nanotechnology-based of earthquakes on some nearby prototypes, such as a portable faults, while lessening chances Monitoring equipment installed biosecurity sniffer, are also on others. in the lower North Island under on the drawing board. Scientists caution that the the GeoNet Project proved its Silicon nanowhiskers behave ‘slow-slip’ deduction is based worth this year by detecting what differently to bulk silicon and do on limited data and sparse appears to be a “slow earthquake” not conform to current theories instrumentation. If confirmed, on the plate interface deep under of physics. Showing vastly it will be only the second Wellington. The phenomenon superior electrical and physical slow earthquake detected in of slow earthquakes has come properties to conventional New Zealand. The good news to the attention of scientists materials, they consist of billions for the future is that more GPS in several places around the of tiny silicon spikes, or whiskers, and seismic instruments will world since the advent of GPS growing from a flat silicon wafer. be installed in the lower North monitoring. Pyramid-like in shape, they are Island as part of the GeoNet A continuously operating GPS typically 50 to 60 atoms high. Project. This will provide valuable receiver on the Kapiti Coast, In technical terms, no other new information on the tectonic north of Wellington, detected material can touch silicon and earthquake characteristics unusual land movement in mid nanowhiskers when it comes of this part of New Zealand. to electron emission. This gives 2003. Until that time, motion them a big advantage as the drive at the site had been steadily continues to make electronic westward at 25mm per year. devices smaller and more energy But in May 2003 it suddenly efficient. slowed to 15mm per year.

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# 07 TEAM LEADERS: # 08 TEAM LEADERS: ANDREAS MARKWITZ, Ion Beam BRIAN FERRIS, Seismologist, Scientist, and S T E V E J O H N S O N , and H I L A R Y FLETCHER, Nanoelectronics Research Scientist. GPS Scientist.

PAGE:19 # 09: data to model possible losses from Our research programme is LANDSLIDE DATABASE landslide damage. Territorial leading to more sustainable use authorities can also use the of geothermal resources and to A REAL ASSET information. For example, reduced environmental impacts. the catalogue shows how often An increase in geothermal energy Landslides in New Zealand – landslides block certain roads – production has a number of benefits. both prehistoric and recent – knowledge that can be used to As well as reducing our reliance are being mapped and compiled plan alternate emergency routes on imported liquid fuel, by GNS in a national database and to evaluate the effectiveness geothermal produces very that is producing valuable in- of road upgrades. Territorial low greenhouse gas emissions. formation for land use and hazard authorities can also use data- GNS also offers advice and studies. The database lists the sizes base information to ensure expertise on the dozens of low and locations of all known large development is appropriate temperature geothermal resources landslides in New Zealand. It also to the landscape, avoiding widely spread throughout features a catalogue of land- landslide ‘hot spots’. New Zealand. Sometimes called slides, including size and dates, low-enthalpy systems, they offer since 1996. The catalogue also their owners potential in tourism, records how much damage the # 10: aquaculture, or industrial landslides cause. A KEY ROLE IN applications. Another area Catalogue information is GEOTHERMAL ENERGY where GNS is prominent is available on the GeoNet website bioremediation of geothermal – www.geonet.org.nz. A planned fluids. New Zealand’s geothermal GNS plays a major role in helping upgrade for the site will make the systems host unique thermophilic to harness New Zealand’s data more accessible and enable micro-organisms that have geothermal energy resources, other organisations to contribute. evolved special characteristics and in applying innovative In landslide hazard work, so they can live in scalding hot research methods to the industry. a probabilistic landslide model water with high concentrations Specialists from GNS’s geo- uses the database to get an idea of toxic trace metals, such as thermal group have been involved of how many landslides can be arsenic and antimony. Under- in all seven of New Zealand’s expected each year from landslide standing these characteristics developed and developing fields. triggers, such as rainstorms opens the way for a wide GNS is also working with power and earthquakes. In the model, range of biotechnological companies and landowners, the North Island has 12 landslide innovations, including the including iwi, to evaluate possible terrains based on landslide treatment of effluents from developments for at least five distribution, geology and geothermal power plants. other undeveloped geothermal topography. resources. Each terrain has a characteristic With a team of 30 scientists and landslide magnitude-frequency technicians spread across many signature, which is combined with disciplines, GNS’s geothermal data from the catalogue to derive group provides expertise in annual landslide rates. The model geology, geobiology, geophysics, will soon cover the whole of geochemistry, petrology, New Zealand. The insurance hydrology, and isotopic sciences. industry can analyse the landslide

# 09 # 10

# 09 TEAM LEADERS: # 10 TEAM LEADERS: GRANT DELLOW, Engineering COLIN HARVEY, Geothermal Scientist, Geologist, and M A U R I M c S A V E N E Y , and C H R I S B R O M LEY, Geomorphologist. Geophysicist.

PAGE:20 # 11: The GNS investigation greenhouse gas emissions and WATER QUALITY encompasses a number of enable New Zealand industry techniques, including hydro- to meet the government’s AT ROTORUA geology, geophysical surveys, Kyoto Protocol obligations. geochemistry, 3D modelling, The technology involves The GNS groundwater team assessment of geothermal systems, separating carbon dioxide from is part-way through a detailed and isotope dating. Environment power plants, compressing it into investigation of the Lake Rotorua Bay of Plenty commissioned a liquid and injecting it deep groundwater system, which plays GNS to do the investigation underground where it can remain an important role in nutrient because of our long track safely for many thousands of inflows to the lake. Findings record in providing high quality years. The oil and gas exploration will enable Environment analytical and commercial services industry has, for many years, Bay of Plenty to start remedial in the groundwater sector. used this method to maintain work to reduce the impact pressure in depleting fields. of nitrogen-rich underground GNS researchers will contribute water on the lake. # 12: expertise in complex petroleum Recent GNS tests on streams MANAGING CARBON reservoirs, active faulting, and risk on the western side of Lake assessment. DIOXIDE EMISSIONS Rotorua have shown there is New Zealand’s storage a significant time delay between potential is vast. It includes GNS, along with Solid Energy land use and its effect on lake depleted oil and gas fields, and Genesis Power, has joined water quality. Isotope analysis deep saline aquifers and an Australian research of stream water entering the lake unmineable coal seams. Carbon programme investigating ways shows it is between 30 and 170 dioxide storage may even lead of burying carbon dioxide years old. This means there to enhanced oil and gas produced from the use of fossil will be increases in nutrients, production from depleting fuels. During the next seven years particularly nitrogen, entering the hydrocarbon fields. The CRC the New Zealand consortium will lake in future unless ways can be programme is widely supported work closely with the Australian found to manage the increasing by industry and is linked to Cooperative Research Centre for nutrient loads. parallel research programmes in Greenhouse Gas Technologies. Hamurana Spring contributes Canada, Japan, the Netherlands, The programme aims to about 64 tonnes of nitrogen Britain and the US. annually to the 80km2 Lake investigate carbon dioxide Rotorua. GNS scientists believe capture and storage, and to this could double in the next develop technologies that will

50 years as the level of nutrient allow industry to reduce CO2 in inflow water increases. emissions in an environmentally These findings are the first stage sustainable and economic way. of a programme designed to gain It also aims to develop new a better understanding of the commercial energy options, Rotorua groundwater system and such as hydrogen energy. nutrient loadings so a robust plan Capturing and storing carbon can be put in place to reverse the dioxide in deep geological trend towards poor water quality. formations will reduce

# 11 # 12

# 11 TEAM LEADERS: # 12 TEAM LEADERS: P A U L W H I T E , Groundwater Modeller D A V I D D A R B Y , Basin Modeller, and TA M ARA TAIT, Hydrogeologist, and R O B F UNNELL, Basin Modeller.

PAGE:21 # 13: IDENTIFYING ENERGY RESERVES THERE’S 600,000 SQUARE KILOMETRES OF SUBMARINE NEW ZEALAND TERRITORY WITH POTENTIAL FOR LARGE ACCUMULATIONS OF OIL AND GAS, BUT WHERE BEST TO DRILL? THIRTY GNS HYDROCARBON RESEARCH SPECIALISTS ARE ON HAND TO HELP PETROLEUM EXPLORATION COMPANIES IN THE QUEST FOR LIQUID ENERGY RESOURCES.

PAGE:22 # 13: kitchens” where conditions are James Crampton. He has been IDENTIFYING ENERGY suitable for the generation of studying New Zealand’s regional petroleum. GNS investigations marine biodiversity patterns over RESERVES have revealed at least a dozen the past 50 million years, using Maui-sized structures. The main probably the best-documented New Zealand is surrounded by source rock is Waipawa black regional fossil record in the world. prospective hydrocarbon basins shale, laid down about 55 million Knowing how biodiversity covering an area exceeding years ago. Geochemical studies has changed in the past is basic 600,000km2. GNS has a team of these source rocks show to understanding all aspects of 30 specialists investigating they have a higher oil to gas of biological evolution. petroleum potential on land ratio than Taranaki source rocks. Studying the fossil record is and in offshore areas. They have This suggests the oil potential a key way of trying to understand evidence that New Zealand’s could be greater than in Taranaki. what has driven changes in offshore basins may hold vast An unusual feature of the diversity. For the past 30 years, reserves of oil and gas. They have East Coast is the existence of huge this record has been taken at played a major role in helping to deposits of frozen methane – face value. Now, however, open up prospective basins off or gas hydrates – starting at depths we understand it is incomplete the North Island’s west coast. of 500m. The formations, and biased in ways that are not Examples are the 120,000km2 covering an area of 50,000km2, yet properly understood. Northland Basin and the are clearly visible by seismic New Zealand’s fossil record 60,000km2 Deepwater Taranaki exploration. GNS scientists have is the best in the Southern Basin. Both areas contain large identified a ‘sweet spot’ 180km Hemisphere, with a complete geological structures capable southeast of Hastings that could database of all known fossils of trapping hydrocarbons. hold the equivalent of at least in the country. James Crampton Recently, the GNS hydro- five years’ supply of gas from recently completed a successful carbons team have turned their the Maui Field. initial study as part of a Marsden- attention to the East Coast Even within the Taranaki Basin, funded project, working with Basin, extending from East Cape, new technology and scientific one of the world’s leading in the north, to Marlborough. insights are helping explorers researchers at the University Closer to the plate margin, target resources and develop of Chicago on the quantitative this basin is geologically very new exploration concepts in analysis of large-scale biodiversity complex and presents new established areas. patterns in the New Zealand challenges for geoscientists fossil record. and exploration companies. He plans to continue this After working with clients on # 14: groundbreaking study, putting specific East Coast prospects, BIODIVERSITY further effort into getting a ‘true’ GNS is broadening its scope RESEARCH signal from the fossil record and to look at a much wider area understanding its inherent biases. of this basin. This work is part of an inter- New Zealand’s unique fossil The East Coast Basin is national effort to understand record is helping scientists 500km long by 160km wide, the big questions in biological internationally understand the and extends to ocean depths of diversity and macroecology. basic processes of macroecology 2000m. It features large regions and evolution, thanks to a study containing “hydrocarbon led by GNS paleontologist

# 13 # 14

# 13 TEAM LEADERS: # 14 TEAM LEADERS: R I C K H E R Z E R , Marine Geologist, JAMES CRAMPTON, and C H R I S U R U S K I , Geoscientist. Paleontologist, and ALAN BEU, Paleontologist.

PAGE:23 # 15: Scanning every box coming off inputs from the earth and the REVOLUTIONARY a production line enables much diversity of these unusual greater quality assurance. organisms. Although New FOOD SCANNER GNS IsoScan and ANZCO Zealand is known to have unique Foods have formed a joint venture communities of higher organisms, GNS is using its skills in software company – MeatVision – the question as to whether development and x-ray tech- to develop the scanner for other there are endemic microbial nology to answer the food food industry applications. communities has not received processing industry’s call for Smiths Heimann, a world leader much attention. faster, more precise on-line in scanning equipment for the This study of microbiological measurement of their products. food and security industries, diversity in extreme environments, In partnership with food is marketing the meat scanner including deep-sea hydrothermal processor ANZCO Foods Ltd internationally under the brand vents, volcanic crater lakes, and US x-ray equipment maker Eagle FA. hot springs, coal seams, Smiths Heimann, GNS has and power plants will attract developed a scanner that is new research partners from expected to deliver multiple # 16: universities and industry. benefits to the food industry. A NEW HOME FOR An initial focus is to compile A dozen prototypes of the NATURE’S SUPER- a New Zealand database of scanner, similar to airport security extreme organisms to provide SURVIVORS scanners, are in use in meat material for the study of the processing plants in New Zealand, genomics and proteomics of GNS has continued developing Australia, and the United States. extreme life. its geomicrobiology capability About the size of a small car and Scientists believe these organ- with the installation of an ex- housed in a stainless steel case, isms and their constituent bio- tremophile research laboratory the device uses dual energy molecules will open up exciting at Wairakei, near Taupo. x-ray absorption technology biotechnology applications, The facility will enable GNS to distinguish the constituents such as treatment of waste to become a world leader in of food and pick up foreign water, remediation of metal- collecting and culturing the super- objects and contaminants. contaminated sites, and recovery tough micro-organisms that live It is already lifting quality of valuable metals from in New Zealand’s geothermal assurance standards in the meat geothermal fluids. Other potential and volcanic environments. processing industry, and is applications include enzyme New staff – from Australia and expected to lead to new products inhibitors, antioxidants, and anti- Germany – have been recruited and open up new markets. cancer agents. Large meat export boxes move to help run the programme at through the scanner at a rate of up the laboratory. to 20 per minute, instantly reveal- The programme will investigate ing a range of crucial information New Zealand’s extreme geologic about their contents. This includes environments to identify and the ratio of fat to lean meat in collect new species and each box. Previously core samples communities of micro-organisms. were taken from random boxes One of our main interests is and sent away for testing. the link between geochemical

# 15 # 16

# 15 TEAM LEADERS: # 16 TEAM LEADERS: MURRAY BARTLE, Radioisotope BRUCE MOUNTAIN, Geomicrobiologist, Scientist and J O H N W E S T , Engineer. and M AT T H E W S T O T T , Geomicrobiologist.

PAGE:24 # 17: internationally – and is unique Specialits from GNS, NIWA, MONITORING AIR in New Zealand. the Navy’s Hydrographic Office As part of the IAEA study, and LINZ are collaborating POLLUTION GNS is working with the Greater on gathering and analysing Wellington Regional Council data to define the boundaries GNS is leading an international to build a profile of the region’s of the submerged New Zealand research project to study airborne airborne particulate matter. continent, and to improve their particulate pollution in urban Results from participating understanding of the structure areas in Australasia. It involves countries are collated in the and evolution of New Zealand’s New Zealand working with US and made available to all crust. GNS’s expertise in marine 15 countries to set up databases participants. Apart from the geology, geophysics, mapping, for identified sources of air benefits of monitoring air quality, and managing large databases particulate matter pollution. the study is helping to raise the is playing a crucial role in this The work, being done under international profile of GNS project. Information gathering the auspices of the International and New Zealand. is now complete and the Atomic Energy Agency, is an project team is compiling its extension of air pollution submission to present to the studies GNS already carries # 18: UN. Working through the out for New Zealand territorial SETTING NEW geographical areas is a lengthy authorities, including Auckland, process, each one taking up to ZEALAND’S OUTER Wellington and Christchurch. a year. A final project will bring Twice a week, filters loaded with BOUNDARIES all the reports together into single air particulate matter are collected submission, with the presentation from sampling units in each area New Zealand has the fifth largest planned for mid-2006. and analysed at GNS’s ion beam exclusive economic zone (EEZ) analysis facility in Lower Hutt. in the world, covering an area Ion beam analysis enables 16 times greater than its landmass. scientists to identify elements GNS scientists are working in the samples and then develop on a project that may see our distinctive ‘fingerprints’ for each domain extended by nearly half source of pollution in an area. as much again by 2006. In 1996, These may vary greatly over time, the New Zealand government producing a profile of what’s in signed the United Nations the air and where it comes from. Convention on the Law of the New Zealand’s coarse airborne Sea (UNCLOS) and began particulates (2.5-10 micrometres) a 10-year project to define the are usually from natural sources extent of our continental shelf such as seaspray or soil, while fine beyond the 200-mile EEZ. particulates (0-2.5 micrometres) The outer limits of New Zealand’s are typically from human sources extended continental shelf, – mainly industry and vehicles. as defined by the UNCLOS, This type of analysis is fast, are being determined by analysis sensitive, accurate, non- of the structure and geology destructive, highly reputable of the seabed and the rocks beneath the seafloor.

# 17 # 18

# 17 TEAM LEADERS: # 18 TEAM LEADERS: ANDREAS MARKWITZ, Ion Beam RAY WOOD, Marine Geoscientist, Scientist and B I L L T R O M P E T T E R , and V A U G HAN STAGPOOLE, Ion Beam Scientist. Geoscientist.

PAGE:25 VITAL RESOURCES: PEOPLE, LEADERSHIP, TEAMWORK

OUR PEOPLE STAFF TURNOVER EMPLOYMENT POLICIES DIVERSITY

GNS attracts and develops people Company-wide, 24 permanent GNS demonstrates its GNS is proud of the many who will make this Company an positions, 11 fixed-term and commitment to fair and consistent nationalities represented within acknowledged world leader in 45 casual positions were filled employment principles through the Company – a reflection of geosciences. We are conscious that in the past year. policies that aim to: the truly global nature of earth many of our staff are highly sciences. We have many inter- skilled and highly marketable. • Provide leadership that values national links and continue to SOURCE OF APPOINTMENTS 2004 What keeps them at GNS a diverse and highly skilled attract world-class scientists Excluding casual appointments is the quality of the science, workforce of different nationalities. Private sector: 10 the opportunity to be involved Government: 7 • Ensure staff have the Among the languages spoken in leading-edge research, and the University: 4 opportunity to receive training by staff as a first language are collaborative and collegial Internal: 3 to develop their full potential Afrikaans, Cantonese, Dutch, Total: 24 management style. • Maintain good relationships Filipino, French, German, Greek, We are a positive and happy 3 with the PSA and staff by Hindi, Korean, Mandarin, Company, and this was borne out working together on Maori, Polish, Portuguese, 4 10 by the results of the October 2003 employment issues Russian, Serbian, Spanish, Cerno workplace attitudes survey. • Encourage staff to use Tamil, and Ukrainian. It showed that overall satisfaction 7 Company health programmes increased by 6 percent and GNS and other staff benefits. STAFF appears to be the happiest of the QUALIFICATIONS nine Crown Research Institutes. We try to be flexible and aim MFTotal We have also significantly STAFF DEPARTURES 2004 to balance the needs of staff and For the following opportunities improved in the areas of valuing the business. During the year, DSc 4 – 4 people and providing career Private sector: 9 we developed a retirement policy Government: 4 opportunities and recognition. Full time study: 2 to provide retiring scientists PhD 84 15 99 Areas for improvement are the Other (includes retirement): 8 with the possibility of working Masters 33 5 38 ability for staff to feel they are Total: 23 on a number of short-term, better able to handle work part-time contracts. This helps Postgrad diploma 4 – 4 loads, and effective corporate staff bridge the lifestyle change 8 9 communication. Managers have from fulltime work to retirement Bachelors degree 61 15 76 put a plan in action to address and, for GNS, allows us to retain 2 NZ certificate 9 3 12 these issues. 4 valuable skills for a longer period. GNS has low turnover and Once researchers stop work Total 195 38 233 during the past year over a third completely, many become of those who left GNS did so emeritus scientists. This is an for lifestyle reasons, such as STAFF TURNOVER honorary role that allows retired family, retirement, overseas travel Year ended 30 June scientists to maintain links with and study. GNS, working on special projects 10.0 and availing themselves of 9.0 GNS’s library and computing facilities. For GNS, the benefit 8.0 is mentoring and coaching 7.0 opportunities for younger staff.

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1.0

0.0 2001 2002 2003 2004

PAGE:26 STAFF DEVELOPMENT REWARDS AND RECOGNITION HEALTH AND SAFETY PERSONAL AND FAMILY SECURITY Career planning is an integral part The introduction of the Career GNS has made huge strides of our staff management system. Path and a more transparent in improving its management GNS, through our insurer, During 2003, we introduced remuneration structure enables of Health and Safety. The Health provides financial assistance for a transparent career and us to more easily compare market and Safety committees did employees’ families in the event remuneration system for scientists rates. Progress towards achieving excellent work in assisting us of death or injury. GNS is also called the Career Path. In the past market rates by 2006 was not as to gain entry into the ACC about to implement an income year, we enhanced the system rapid as we had hoped. The main Workplace Safety Management protection policy for staff. with the development of new reason for this was the higher than Programme. While we have GNS assists staff with policies and procedures to enable expected increases in market rates. always taken Health and Safety retirement planning by facilitating the first applications from science GNS remains committed to seriously, it is reassuring that our employee deductions and staff for progression. Although improving the remuneration systems have passed independent paying administration costs the system worked well, more of its staff. audit standards. for GSF (Government Super- enhancements are likely over As in previous years, we have annuation Fund) and GRT the next few years as staff and made medical checks, ’flu’ shots, (Global Retirement Trust). managers become more familiar AVERAGE hearing tests, and workplace As at 30 June 2004, 30 percent with the system and process. REMUNERATION/FTE assessments available to staff. of staff participated in company Work has also progressed towards We have also offered first aid retirement savings plans. 66,000 developing a career structure and four-wheel drive training Also available are group for support staff. 64,000 for staff involved in field work. discount arrangements for

62,000 medical insurance. EMPLOYEE RELATIONS 60,000

Once again, GNS has enjoyed 58,000 WORKING DAYS LOST good relationships with the DUE TO INJURY 56,000 Year ended 30 June PSA this year, having worked with them on a number of issues. Dollars 54,000 60 The Collective Employment 52,000 Agreement was negotiated and 50,000 signed in June 2004. Employee 50 relations with non-union staff 48,000 were also good and GNS is in the 46,000 40 process of renewing Individual 0 Employment Agreements. 30 1999 2001 2000 2002 2003 2004 Number of days of Number 20

10

0 2001 2000 2002 2003 2004

PAGE:27 COLLABORATIONS AND PARTNERSHIPS

GNS is a highly collaborative Research (NIWA) have combined Minerals, GNS has prepared company that works with to form the Natural Hazards a detailed hydrocarbons a wide range of organisations in Centre. It provides New prospectivity report on the New Zealand and internationally. Zealanders with a single Northland Basin. Parts of the The following list of examples is point of contact for the latest Northland Basin were opened not exhaustive, but it reflects the research, resources, and scientific for licensing this year and the diversity of our activities and the expertise in natural hazards. GNS report enables exploration breadth of our relationships. The Centre delivers world- companies to confidently evaluate class information and research the acreage on offer. The report Earthquake engineering cluster to emergency and resource has identified 50 geological GNS is a member of Earthquake managers, the science community, structures capable of trapping Engineering New Zealand, and other stakeholders. hydrocarbons. Five of them a network of 34 consultants, Visit: www.naturalhazards.net.nz are larger than 100km2. researchers, manufacturers, and educators specialising in EQC and GNS – Dealing with carbon international work in earth- an enduring relationship dioxide emissions quake engineering, seismology, GNS has a long-term partnership GNS has formed a consortium and related services. with the Earthquake Commission. with coal producer Solid Energy EQC is the core funder of our and electricity generator Genesis Hazards information service GeoNet Project which is building Energy to investigate ways of for property owners and operating a world-class burying carbon dioxide produced In partnership with Quotable geological hazards monitoring from the use of fossil fuels. Value New Zealand and system for New Zealand. Over the next seven years the Niu Pacific, GNS has formed New Zealand consortium will PropertyInsight, a stand-alone Antarctic climate research work closely with the Australian company that has developed GNS is a leading coordinator Cooperative Research Centre for an on-line hazard information of the multinational ANDRILL Greenhouse Gas Technologies. service for 900,000 urban project, which plans to drill two Capture and storage of this properties in New Zealand. deep sediment cores through the greenhouse gas in deep geological Ross Ice Shelf in Antarctica to formations will significantly Natural hazards grouping find out more about polar climate reduce emissions from coal and GNS is a member of Natural and ice sheet behaviour over the gas-fired power stations. Hazards New Zealand, a group past 15 million years. The project of 31 organisations specialising involves New Zealand, Germany, Deep biosphere research in the management of natural Italy, and the United States. GNS is collaborating with German hazards. Services range from The proposed drill sites will earth science research organisation risk assessment, research and be two of the deepest seafloor GeoForschungsZentrum Potsdam engineering, to economic drillholes yet attempted in the (GFZ) and the University of evaluation. frozen continent. To achieve Cardiff in Wales to drill the first this, scientists will use the most “deep biosphere” borehole in Pacific Island consultancy advanced drilling technology New Zealand. Over the next three With Landcare Research and ever deployed in Antarctica. years, the team will study the Beca International Consultants, ANDRILL is the flagship project geomicrobiology, biogeochemistry GNS has formed a consortium of Antarctica New Zealand. and organic geochemistry of the to help Tonga with its cyclone GNS’s project leader is paleo- core samples to identify the microbes risk management and emergency climate scientist Tim Naish. present and determine how they recovery plan. proliferate in such a hostile Oil and gas prospects in the environment. Knowledge gained Natural Hazards Centre Northland Basin from this project will be valuable GNS and the National Institute In partnership with UK-based for a number of applications, of Water and Atmospheric Spectrum Energy and Crown including biotechnology.

PAGE:28 Biodiversity research Greenhouse climate research Working with Ngai Tahu Understanding past bio- GNS is part of an international on greenstone diversity patterns is fundamental team working to understand GNS collaborates with Ngai Tahu to understanding all aspects the consequences of greenhouse to assess the distribution of of biological evolution. warming for planet Earth. pounamu (greenstone or jade) GNS is collaborating with The five-year programme is led in the South Island. Knowledge Michael Foote of Chicago by climate scientist James Zachos gained from this project will University’s Department of of the University of California, enable informed management Physical Sciences to characterise Santa Cruz, and funded by the of pounamu. and explain New Zealand’s US National Science Foundation. marine biodiversity patterns Research is focused on the effects Reconstructing past Southern over the past 50 million years. of extreme global warming 55 Hemisphere climate Our New Zealand study, using million years ago. Chris Hollis In collaboration with Victoria the best-documented regional of GNS is leading the study University and the University fossil record in the world, of New Zealand records of of Maine, USA, GNS has set up will become an international this event. a programme to use geochemical benchmark when completed. information from Antarctic Density scanners for the and Southern Alps ice cores Gaining knowledge of timber industry to “retro-monitor” Southern seafloor resources within With Carter Holt Harvey Hemisphere climate. This New Zealand’s EEZ subsidiary fibre gen, GNS has recognises New Zealand’s key Gaining new knowledge and formed a joint venture company geographical location at the improved understanding of – TrueView – to make and market boundary between Northern New Zealand’s vast offshore novel scanning instruments for and Southern Hemisphere territory is a major programme the timber processing industry. climate systems. within GNS. To achieve this, They are used in plants through- GNS collaborates with the out Australasia and will soon Long-term relationship National Ocean and Atmospheric be installed in North American with Te Papa Administration (NOAA) and the timber processing plants. GNS is a foundation corporate Japan Marine Science and associate of Te Papa Tongarewa, Technology Centre (JAMSTEC). Novel scanners for the the Museum of New Zealand. In 2005, the collaboration will food industry GNS provides the museum be extended to include the With ANZCO Foods Ltd, with authenticity, collections, University of Hawaii, which will GNS has formed MeatVision, and staff time. GNS helped build bring its Pisces IV and Pisces V a joint venture company to Awesome Forces, the museum’s submersibles to New Zealand develop and commercialise most popular permanent exhibit. to help us explore the Kermadec innovative scanning technology Arc, northeast of Bay of Plenty. for the food industry. Removing nitrate from wastewater Partnering a Maori university Nanotechnology and GNS and Landcare Research have GNS works closely with a Maori advanced materials formed a joint venture to manu- university in Whakatane – Te GNS is a member of the Mac- facture and market denitrification Whare Wananga o Awanuiarangi Diarmid Institute for Advanced beds that remove nitrate from – to help build their capacity Materials and Nanotechnology, wastewater. The use of denitri- in earth and environmental one of the New Zealand fication beds to remove nitrate sciences. The GNS input consists government’s Centres of from municipal effluent is a first of teaching, supervision of post- Excellence. for New Zealand, and is in line graduate students, and workshops with international best practice. on topical issues. Called XN Solutions, the joint venture works with industry and territorial authorities to minimise nitrogen release in the environment.

PAGE:29 PRINCIPAL SCIENTISTS

GNS has a proud tradition of with a large earthquake on the at the French National Museum scientific excellence and inter- Wellington Fault. Rafael’s work of Natural History in Paris. nationally recognised research. on different subjects of wave Alan is also a Fellow of the Leading the way are our principal propagation has led to numerous Royal Society of New Zealand. scientists who have substantial collaborations with overseas and enduring reputations in colleagues. In 1998 he won a Hugh Bibby: A mathematician their fields. They demonstrate Japanese Fellowship for the by training, Hugh applies his high productivity, outstanding Promotion of Science, and in 2003 skills to a wide range of geo- achievement in applied science he worked as a consultant in the physical applications, including innovation and original thinking. Bullard Laboratory, University new methods in geothermal They are recognised by their peers of Cambridge, UK. exploration and initiating the and by non-research entities as rigourous analysis of earth pre-eminent. Our principal scien- Kelvin Berryman: Kelvin is deformation in New Zealand, tists attract valuable collaborations a Quaternary geologist who and the study of magmatic and business opportunities and focuses on the earthquake and systems. He and his colleagues represent New Zealand with dis- tectonic aspects of geology in have developed methods for tinction on the international stage. New Zealand. He initiated fault measuring and interpreting the trenching studies in New Zealand electrical properties of the earth John Beavan: John is a geo- to learn more about the occur- that are widely used in the study physicist who explores the rence of large earthquakes over of crustal processes. His work deformation of the earth’s the past 250,000 years. This has in the geothermal industry has surface. As well as being the led to major involvement in led to a new understanding of the primary cause of earthquakes, earthquake hazard and risk geothermal processes, including this deformation is the underlying studies, both in New Zealand the link with magmatic systems reason for the present appearance and internationally. Another responsible for the massive of the New Zealand landscape. thrust of Kelvin’s work is the eruptions in the Taupo area. John uses geodetic techniques, integration of New Zealand’s He is a Fellow of the Royal such as GPS, to precisely measure present-day tectonic movement Society of New Zealand, and has the deformation associated with into a broader geological received numerous other awards. plate tectonics, earthquakes framework, often in collaboration and volcanoes. He uses these with visiting researchers. Cornel de Ronde: Since 1997 measurements to investigate the Kelvin is the GNS programme Cornel, a geologist, has led underlying mechanisms behind leader of Natural Hazards Research a GNS programme to discover the deformation, and applies and is recognised internationally and understand submarine the results to enhance the in the fields of active tectonics volcanism and hydrothermal New Zealand survey system and seismic hazard analysis. venting along the Kermadec and improve estimation of section of the Pacific Ring of Fire, earthquake and volcano hazards. Alan Beu: Alan is a paleontologist northeast of New Zealand. He has been heavily involved who studies the shell fossils This frontier research includes in the development of GeoNet, (molluscs) of New Zealand’s exploring active submarine a major upgrade to geological Cenozoic marine rocks (deposited volcanoes and sea floor vents hazard monitoring in New during the last 65 million years), remotely and in submersibles. Zealand, and is an advisor to a to provide information on Cornel has become adept at similar project in the United States. climate change, on depositional bringing together diverse groups environments of rocks, on the of highly skilled specialists from Rafael Benites: Rafael is a history of the present fauna, on many organisations and geophysicist who specialises in the record of organic evolution, numerous countries to study numerical modelling of seismic and on the contribution of New the 2500km stretch of volcanic wave propagation and earthquake Zealand fossils to evolutionary arc between New Zealand and fault ruptures. One of his main theory. His particular focus is on Tonga. He is internationally projects is to combine numerical young fossils (less than 5 million recognised for this work and techniques and observed earth- years), on fossil scallops, and on is in high demand as a speaker quake data to predict strong a worldwide group of gastropods. at a wide variety of forums, from ground motion in the Wellington His international recognition has scientific conferences to special metropolitan region associated led to four visiting professorships interest groups and schools.

PAGE:30 David Dowrick: David is a civil His particular interest is reservoir deposits, they nurture microbial engineer who has specialised sandstone sequences deposited habitats populated by extremo- in earthquake engineering and in deep marine environments. phile organisms with potentially engineering seismology for Peter is leader of the GNS high medicinal and commercial 30 years. He has worked on Petroleum Research Programme. value. These emissions may also a large number of earthquake- He has been awarded a DSc degree, impact global climate as well related phenomena and issues. a New Zealand Science and as the chemistry of the oceans. These range from the size of fault Technology Bronze Medal Gary is recognised internationally ruptures, through attenuation and for his reference works on the for his studies of the chemistry earthquake hazard and risk, to petroleum-producing Taranaki of submarine hydrothermal vents studies of microzoning, Basin, and has won awards along plate boundaries. earthquake damage and casualties, for best paper and best poster and earthquake-resistant design. at international oil industry Graeme McVerry: Graeme is David is internationally conferences. an engineering seismologist who recognised for his research researches and develops seismic into earthquake vulnerability Andreas Markwitz: A nuclear hazard models for New Zealand. of the built environment and physicist by training, Andreas This includes developing models earthquake risk reduction. leads GNS’s nanotechnology, for the attenuation of strong ion beam analysis, and advanced ground motion from earthquakes Ian Graham: Ian is an isotope surface materials programmes. in New Zealand. Graeme has geologist who specialises in His nanotechnology team at GNS provided seismic hazard radiometric isotope analysis has won worldwide recognition consultancy services for major of rock systems, to better under- for developing silicon nano- developments in New Zealand stand their age and evolution. whiskers and silicon nano- and Australia, including work Since publishing widely on the boulders – nanostructures on bridges, dams, electricity petrogenesis of Taupo Volcanic with potential uses in the next distribution facilities, and port Zone rocks and low-grade generation of electronic devices. facilities. metamorphism of Torlesse terrane He also has interests in under- sediments, he has moved on standing the nature and source Martin Reyners: Martin is to apply beryllium isotope of particulates in air pollution, a seismologist who focuses on the techniques to dating ferromang- and in analysing otoliths to find seismicity, structure and tectonics anese nodules, Antarctic soils, out more about the life cycles of the plate boundary through deep-sea sediments, and under- of commercial fish species and New Zealand. His particular standing the evolutionary history shellfish. Andreas is a principal interest is the country’s two of Wanganui Basin sediments. investigator with the MacDiarmid subduction zones, which he Ian manages GNS’s Mineral Institute of Advanced Materials has studied in detail with Wealth of New Zealand and its and Nanotechnology, and the dense deployments of portable EEZ programme, through which New Zealand representative seismographs. A major motivation he has begun to investigate the for air pollution projects co- for this work has been to determine relationship between subduction ordinated by the International the seismic hazard posed by the volcanism and gold-bearing Atomic Energy Agency. shallow part of the plate interface. massive sulphide deposition. He has also increased Gary Massoth: A chemical understanding of recent large Peter King: Peter is a sediment- oceanographer by training, earthquakes through detailed ologist, who studies the Gary explores the ocean within aftershock studies. Martin’s 80 million-year history of New Zealand’s Exclusive work on subduction zones has New Zealand’s sedimentary Economic Zone and the Western led to substantial international basins. He reconstructs the Pacific Basin to discover and collaboration, and has been paleo-geography of ancient fluvial characterise seafloor chemical recognised with a New Zealand and marine depositional systems emissions. These emissions rise Science and Technology Medal. from the type and distribution from submarine volcanoes and of sedimentary rock layers, to buried methane deposits and David Rhoades: David is provide a geological framework have significant impacts on society a geophysical statistician who for predicting present-day sub- and the environment. As well works on improving models surface occurrences of petroleum. as forming recoverable mineral for earthquake hazard and risk.

PAGE:31 PRINCIPAL SCIENTISTS, CONTINUED

The work aims to provide better While administration of the hazard analysis. Rupert is leader information on the likelihood radiocarbon laboratory takes most of the GNS research programme of future large earthquakes and of his time, he also has interests that investigates the impacts their damaging effects, and to in aspects of radiocarbon age of plate tectonics in and increase our understanding of calibration and the use of radio- around New Zealand, and he how earthquakes are generated carbon as an environmental tracer. has a Marsden Fund award and what makes us vulnerable Most recently, he has become to investigate the initiation of to them. His pioneering studies, involved with NIWA scientists subduction zones and evolution in collaboration with Professor in using radiocarbon to study the of plate-driving forces. Frank Evison of Victoria average age of commercial fish University of Wellington, stocks. Rodger is on the editorial Gavin Wallace: Gavin is a nuclear on patterns in the occurrence board of the journal Radiocarbon. physicist who specialises in of small earthquakes before developing non-invasive scanning large ones, are leading the way Mike Stewart: As a geologist and measuring applications for internationally in developing with a physics background, industry. With the engineering a reliable method for long- Mike uses environmental teams at GNS, he has designed range earthquake forecasting. tracers to investigate subsurface and built a range of instrument- He is an Associate Editor of the water flow in New Zealand. ation that includes portable Journal of Geophysical Research, He introduced CFC dating elemental analysis, computed and Vice-President of the Asian of water to GNS in 1997 and tomography, and density gauges. Seismological Commission. has pioneered its application in These have been marketed New Zealand. This technique has worldwide. The most successful Russell Robinson: Russell is allowed groundwater residence is an on-line lumber density a seismologist who focuses on times to be determined with gauge currently used at 11 mills computer modelling of earth- unprecedented accuracy, and has in Australasia and about to be quakes as they occur in complex lead to reconsideration of the installed in the US. Gavin is fault networks, with the aim of meaning of groundwater ages periodically contracted as making seismic hazard assessment and in particular the influence an expert for the International more reliable and eventually time of groundwater dispersion. Atomic Energy Agency, dependent. He is also working on This provides valuable insights and received a QSM for improving earthquake location into the transport of contaminants public services in 1998. methods, taking advantage of in the environment. Mike is also today’s rapidly increasing leading the development of another Colin Wilson: Colin is a volcan- computer processing speeds. water dating technique that uses ologist who studies the processes For many years he has studied sulphur hexafluoride. He is involved in large explosive earthquake occurrence in the recognised internationally for his eruptions in New Zealand and Wellington region, and was contributions to tracer hydrology. the United States. This work responsible for the establishment includes the ways in which of the Wellington Seismograph Rupert Sutherland: Rupert magmas are generated and stored Network. Russell has gained studies the large-scale processes below the caldera volcanoes significant international of plate tectonics, and how these in Taupo Volcanic Zone. recognition for his work in have led to the formation of Colin also undertakes field earthquake seismology, and his New Zealand and the South investigations of eruptive computer programmes are Pacific. His work requires the processes, to understand how used internationally. integration and analysis of satellite volcanic products are reworked data, marine geophysical data, in the aftermath of eruptions. Rodger Sparks: Rodger is the and geological observations. He is particularly concerned leader of the Rafter Radiocarbon The results provide a framework with studies of ignimbrites, Laboratory at GNS, and has for applied analysis of petroleum the products of large-scale held this position for 14 years. basins and other resources. pyroclastic flow eruptions, His background is in experi- His work also enables a better and how such events can be mental nuclear physics, and he understanding of how deform- understood and forecast. He is helped establish the accelerator ation is currently occurring a past winner of the Wager Prize mass spectrometry facility at throughout New Zealand, which of IAVCEI, and is a Fellow of the GNS in the 1980s. has implications for geological Royal Society of New Zealand.

PAGE:32 COMMERCIALISATION

GENERATING WEALTH DEMAND INCREASES FOR SEISMIC PROCESSING SOFTWARE GNS’S APPROACH TO FROM SCIENCE RISK MODELLING SERVICE FINDS INTERNATIONAL NICHE COMMERCIALISATION

The purpose of our commer- Recent developments in GNS’s GNS’s seismic processing

N IN cialisation is to generate revenue earthquake risk modelling have software, Globe Claritas, O F I O T End-user R A M M A R for GNS and deliver sustained enabled us to provide a service of has been sold in 13 countries. T O I F O

N N and substantial benefits for risk assessment to the insurance Initially developed in-house I Manufacturer New Zealand. Since 2001, industry and large companies. The as a research tool, it has been GNS Distributor our commercial revenue has modelling builds on long-term continually upgraded and has grown 18 percent to $11.1 million research in geology, seismology become an attractive option for I NFORMATION in the year ending 30 June 2004. and engineering to produce a wide range of users, including Our commercialisation strategy estimates of the likelihood of universities, independent seismic involves forming joint ventures earthquake damage to specified processing operators, and oil • Our commercialisaton strategy is to work directly with end-users, with industry partners and portfolios of assets. We have done and gas exploration companies. manufacturers and distribution companies. tailoring products to end-user assessments for large industrial Designed to run on low-cost • Our focus is on R&D, but we need information from our partners needs. Outlined below are concerns, owners of commercial PCs and laptops, it offers an to effectively direct our R&D efforts. examples of our joint venture buildings, regional councils, attractive alternative to other • We learn from our partners approach, a customised government departments, and seismic processing packages and our partners learn from us. • Managing the information flow is critical risk modelling initiative, for entire insurance company on the market. and distance still matters. and a software product that portfolios. Our assessments of GNS adopts a flexible approach • Geographical, psychological and cultural GNS has successfully marketed likely damage from earthquakes to licensing the software. For a proximity are important. internationally. have been used by insurance single fee, a customer can install companies and brokers to design the software a number of times SCANNING TECHNOLOGY insurance packages suited to at a given site, making it very cost- LEAPS AHEAD individual portfolios of assets. effective. We encourage customers Standard assessment packages, to sign up to an annual main- Working with partners in the which have been available com- tenance contract to take advantage timber and meat processing mercially for some years, tend not of our 24-hour helpline and to industries, GNS has commer- to use the most recent data and, obtain regular software upgrades. cialised real-time, on-line in our experience, over-estimate The latest upgrade, version 4.1, scanning devices that use x-ray the level of risk from earthquakes. takes Globe Claritas into a new technology. The products, We believe we have a more reliable dimension as it allows large developed under the GNS analysis procedure. During the complex data sets to be processed IsoScan brand are markedly past year, we have presented an quickly and on low-cost Linux superior to conventional on-line analysis of risk assessment proc- clusters. The new version greatly testing and measuring systems. edures to international reinsurance enhances the software’s ability to Involving industry partners from underwriters in several countries. manage large-scale production an early stage ensures the projects An important aspect of the runs, which adds to its versatility adhere to commercial imperatives. analysis is that where assets are and market appeal. It also facilitates prototype testing distributed geographically, the in real-life situations. Our first combined risk is less than the sum major success was a lumber of the individual risks. We can density gauge developed with analyse distributed assets to timber processing company provide reliable estimates of likely Carter Holt Harvey. It enables losses to the portfolio as a dis- automatic sorting of “green” tributed entity. Some clients have timber and precise kiln drying. found that losses at particular sites The instrument pays for itself are unlikely to exceed the insurance surprisingly quickly through excess. This finding has led to increased efficiency, less waste, decisions to self-insure at those and higher revenues. It is in use sites, or to renegotiate excess in 11 timber processing plants levels. We market this risk throughout Australasia, and has assessment service directly to the recently been installed in a plant insurance industry and to large in the US. corporates with multiple assets.

PAGE:33 MANAGEMENT TEAM

ALEXANDER MALAHOFF MURRAY HEMI MICHAEL ISAAC JENNIFER VAN HUNEN CHIEF EXECUTIVE MANAGER, MAORI STRATEGY GENERAL MANAGER, MANAGER, HUMAN RESOURCES PhD, University of Hawaii; BA, University of Canterbury; NATURAL RESOURCES GROUP BA, Victoria University DSc, Victoria University of Wellington MAppSci (Hons), Lincoln University PhD, University of Auckland of Wellington

Alex leads the Executive Team Murray is responsible for Mike is responsible for the Jennifer is responsible for the and oversees the day-to-day developing GNS’s capacity Hydrocarbons, Geothermal full range of human resources management of GNS on behalf to build effective relationships & Minerals, and Geological functions. She started at GNS of the Board of Directors. with iwi. Key functions include Time Sections. He is a former in 2002, having held HR The team meets regularly increasing the relevance of GNS manager of GNS’s national management positions with to consider strategy, policy, research to Maori development, mapping programme, which the Ministry of Justice and the investment, science programmes, staff coaching, and network includes the innovative GIS- Maritime Safety Authority and to monitor performance. assistance. based QMAP programme. of New Zealand. Before starting as Chief Executive in July 2002, Alex was Professor TERRY WEBB FRANK BRUHN ROB JOHNSTON GENERAL MANAGER, GENERAL MANAGER, GENERAL MANAGER, of Oceanography at the NATURAL HAZARDS GROUP NATIONAL ISOTOPE CENTRE BUSINESS DEVELOPMENT AND University of Hawaii. PhD, University of Canterbury PhD, Bochum University, Germany INFORMATION SERVICES BSc, Dip ORS, Dip Tchng

DESMOND DARBY Terry is responsible for the Frank manages GNS’s GENERAL MANAGER, STRATEGY Earthquakes Volcanoes National Isotope Centre which Rob’s portfolio includes managing PhD, State University of the Company’s commercial New York at Stony Brook Tectonics, Geohazards Solutions, includes the Rafter Radiocarbon Mapping, and GeoHazards Laboratory, the Rafter Stable operations and intellectual Des leads GNS’s strategic Monitoring Sections. Isotope Laboratory, the GNS property issues. He also manages directions in research and A seismologist by training, Ion Beam Laboratory, and GNS GNS’s extensive IT platforms, as consultancy for both government Terry specialises in waveform IsoScan. Frank joined GNS in well as leading the library and and private sectors. He also modelling of large historical 2002 after having worked for graphics teams, and looking after manages GNS’s public relations New Zealand earthquakes and the CSIRO in Australia and publications, the photo library, and outreach activities. As a seismic hazards. a radiocarbon dating laboratory national collections, the GNS former GNS Section Manager, in Germany. Website, and the GNS Online he led a major research ROBIN FALCONER programme. Prior to joining GENERAL MANAGER, RESEARCH GRAHAM CLARKE GNS, Rob held senior manage- programme on the effects of plate PhD, Victoria University of Wellington CHIEF FINANCIAL OFFICER ment positions with Tasman tectonics on New Zealand. CA, BCA, Victoria University Robin coordinates and monitors of Wellington Forestry in Rotorua and with GNS’s publicly funded research Public Trust. programmes. Before coming to Graham is responsible for all GNS in 1995, Robin was a private finance-related matters, sector geoscience consultant in procurement, property and asset New Zealand. He has also held management. His group provides research and management management and financial analysis positions with the Geological with the aim of increasing Survey of Canada. shareholder value. Before coming to GNS in 1994, Graham was a senior manager for KPMG.

ALEXANDER DESMOND MURRAY TERRY ROBIN MICHAEL FRANK JENNIFER MALAHOFF DARBY HEMI WEBB FALCONER ISAAC BRUHN VAN HUNEN

PAGE:34 FINANCIAL STATEMENTS

REPORT OF THE DIRECTORS 36

BOARD MEMBER PROFILES 37

CORPORATE GOVERNANCE 38

REPORT OF THE AUDITOR-GENERAL 40

STATEMENT OF FINANCIAL PERFORMANCE 41

STATEMENT OF MOVEMENTS IN EQUITY 41

STATEMENT OF FINANCIAL POSITION 42

STATEMENT OF CASH FLOWS 43

NOTES TO THE FINANCIAL STATEMENTS 44

PERFORMANCE INDICATORS 51

STATEMENT OF RESPONSIBILITY 52

DECLARATION OF DIRECTORS’ INTERESTS 53

INTERNATIONAL LINKAGES, DATABASES AND COLLECTIONS 54

DIRECTORY 55

GNS BUSINESS GROUPS AND CAPABILITIES 56

GRAHAM ROB CLARKE JOHNSTON

PAGE:35 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2004

The Directors have pleasure in presenting the Employee remuneration Annual Report and audited accounts of GNS In accordance with section 211 (1) (g) of the for the year ended 30 June 2004. The Financial Companies Act 1993, below are numbers of Statements have been prepared in conformity employees who received remuneration and other with generally accepted accounting principles to benefits totalling $100,000 or more, in $10,000 give a true and fair view of the Group’s financial bands, during the year to 30 June 2004. position and its operations and cash flows. $000 2004 2003 The Auditor-General has appointed Deloitte 100-109 12 7 to audit the Financial Statements and to express 110-119 5 4 an opinion on them. The independent auditor’s 120-129 1 3 report is set out on page 40 of this report. 130-139 – 1 The Auditor-General is the statutory auditor 140-149 2 – pursuant to section 21 of the Crown Research 150-159 1 – Institutes Act 1992. 160-169 – 2 180-189 2 – Principal activity 190-199 1 – GNS’s principal activity is to conduct scientific 230-239 – 1* research and provide associated commercial 260-269 1 * – services in earth sciences and isotope technologies in accordance with the principles for the operation *Chief Executive. of Crown Research Institutes set out in sections 4 Donations and 5 of the Crown Research Institutes Act 1992. GNS donated $1000 to the Life Flight Trust Accounting policies during the year (2003: $1000). There have been no changes in accounting policies Directors’ indemnity during the year. Insurance has been effected for Directors in Dividend respect to any act or omission in their capacity GNS paid a dividend of $350,000 to its as a Director of the company. Directors have shareholder, the New Zealand Government, in declared their interests in a Deed of Indemnity October 2003. No further dividend is proposed. dated 17 October 1996, whereby the company indemnifies Directors against any liability for Remuneration of Directors any act or omissions incurred in their capacity Directors’ fees paid during the year was as follows: as a Director. 2004 ($) 2003 ($) Events subsequent to balance date Con Anastasiou (Chairman) 38,000 32,000 The Directors are not aware of any matter or Richard Westlake 23,750 20,000 (Deputy Chairman) circumstance since the end of the financial year Sarah Schiess 19,000 16,000 not otherwise dealt with in this Annual Report Brenda Tahi 19,000 16,000 that has, or may have, a significant effect on the Michael Walker 19,000 16,000 operation of the Institute of Geological & Mike Williams 19,000 16,000 Nuclear Sciences Limited.

Board composition Certification Michael Walker retired from the Board on The Directors confirm the Company has operated 30 June 2004 and Ellen Förch was appointed in accordance with the Crown Research Institutes to the Board on 1 July 2004. Act 1992 and the Companies Act 1993 during the year. Subsidiaries The Company has three subsidiary companies. Note: Directors’ disclosures can be found on page 53. Directors of these subsidiary companies are: On behalf of the Directors IsoScan Limited: Con Anastasiou, Alexander Malahoff Geological Surveys (NZ) Limited:

Con Anastasiou, Alexander Malahoff CON ANASTASIOU IsoScan Food Limited: Chairman 18 August 2004 Con Anastasiou, Alexander Malahoff PAGE:36 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

BOARD MEMBER PROFILES

CON ANASTASIOU RICHARD WESTLAKE ELLEN FO¨RCH MICHAEL WALKER Chairman Deputy Chairman PhD PhD, FRSNZ BA, LLB (Hons) MA (Oxon), F Inst D, FNZIM Auckland Auckland Wellington Wellington (Retired 30 June 2004) Ellen is Director of Research Con is principal of his own Richard is Chairman of Advancement at the Michael is an Associate law firm in Wellington. the Standards Council of University of Auckland. Professor in the School He specialises in corporate New Zealand and Canterbury Her main activity is as a of Biological Sciences at commercial law, intellectual Opera. He is also a Director research funding strategist. the University of Auckland, property, and resource of Kiwibank Limited and the In doing this she forms and co-Director of Nga Pae management. He is a Centre for Advanced a bridge between the o te Maramatanga, the member of the New Zealand Engineering. During the year, university’s public good, Centre of Research Law Society, a Fellow he retired as Chairman business, and development Excellence for Maori of the New Zealand Institute of Quotable Value Ltd arms. Previous positions Development and of Management, a member and Holmes Group Ltd included manager of Advancement. He is also of the New Zealand Institute (structural & civil engineers). environmental monitoring a member of the Royal of Directors, and an After 20 years in executive at Hawke’s Bay Regional Society of New Zealand Associate of the Arbitrators roles, mainly in banking Council, research manager Council. Michael plays and Mediators Institute and merchant banking, at the Open Polytechnic a leading role at the of New Zealand. Con is he now runs his own of New Zealand, policy interface between Maori also a Director of Airways corporate governance consultant at the Ministry and science communities, Corporation of New Zealand consultancy and is currently of Research, Science & and has helped government Ltd and of Med-Dev Ltd. the Acting Chief Executive Technology, and a science organisations of Horizons Regional Council. programme manager at the understand their Foundation for Research responsibilities under Science & Technology. the Treaty of Waitangi. His iwi is Whakatohea.

SARAH SCHIESS BRENDA TAHI MIKE WILLIAMS MSc, Civil Engineering BSocSc, MBA (Henley) MA (Hons) (Colorado State University) Ruatahuna Auckland Wellington Brenda is Director of Mike is President of the Sarah is Environmental Brenda Tahi and Associates. New Zealand Labour Party, Manager with BP Oil She is Deputy Chair of the a Director of Genesis New Zealand Ltd. Her Accident Compensation Energy, and of Transit portfolio includes soil and Corporation and a former New Zealand. He was groundwater remediation, acting chief executive formerly managing director climate change, emissions of the Department of of the Insight Group reporting, and industry Internal Affairs. She has and he has a particular standards. She has held senior management interest in the marketing 11 years’ experience working and advisory positions at of New Zealand and for environmental and the Ministry of Women’s intellectual property issues. engineering firms in the Affairs, and at the Office US and New Zealand, of the Controller and specialising in quantitative Auditor-General. Brenda is groundwater flow analysis, a member of the Hutt mine dewatering, and Valley District Health Board environmental projects. and the board for Nga Pae Sarah has also worked o te Maramatanga for the US Geological (National Centre of Maori Survey Water Resources Research Excellence). Division doing numerical She is Ngati Porou and analysis of aquifer systems. links also to Tuhoe.

CON RICHARD ELLEN MICHAEL SARAH BRENDA MIKE ANASTASIOU WESTLAKE FÖRCH WALKER SCHIESS TAHI WILLIAMS Chairman Deputy Chairman

PAGE:37 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

CORPORATE GOVERNANCE

Overview Operation of the Board The Board and GNS management are committed A Board Charter sets out policies and procedures to ensuring the Company maintains best practice for the operation of the Board. The Chairman’s governance and adheres to the highest ethical role is to provide leadership to the Board and to standards. The basis for this commitment is out- maintain regular dialogue with the Chief Executive. lined in a Board Charter, adopted in June 2002, The Chairman, in consultation with the Chief and in policies and procedures maintained by Executive, establishes the agenda for each Board the Company. meeting. Each Board member can, through the Chairman, suggest items for the agenda. The Role of the Board Chairman ensures all discussions result in logical The Board is responsible to the shareholding and understandable outcomes. Board members ministers for directing and supervising the are entitled to have access to all relevant company management of the business and affairs of information and to management. GNS, including: Directors’ meetings • appointing the Chief Executive, agreeing on The full Board had 10 meetings during the year the objectives he or she is required to achieve, ended 30 June 2004. Board meetings were held and monitoring and evaluating their at the Company’s facilities. There is an ongoing performance programme of presentations to the Board by • ensuring the Company’s goals are clearly management and senior scientists to help keep established, and that strategies are in place Directors abreast of Company activities. for achieving them • establishing policies for strengthening the Meetings in the year to 30 June 2004 performance of GNS, including ensuring Board Meetings Held Attended management is working to build the business Con Anastasiou 10 10 through innovation, initiative, technology, Richard Westlake 10 10 new products, good employment practices, Sarah Schiess 10 10 and the development of its business capital Brenda Tahi 10 9 • monitoring the performance of management Michael Walker 10 10 • ensuring GNS is a good employer, Mike Williams 10 9 demonstrating social responsibility, and maintaining its financial viability as required Audit Committee Held Attended under the Crown Research Institutes Act 1992 Con Anastasiou 2 2 • ensuring GNS’s financial statements are true Richard Westlake 2 2 and fair, and conform with law and generally Michael Walker 2 1 accepted accounting practices • ensuring GNS has appropriate risk Accountability of the Chief Executive management and regulatory compliance The Chief Executive is accountable to the policies in place. Board for achievement of the Company goals. The Board and the Chief Executive agree on Board Membership a performance contract under which the Directors are appointed by the shareholding Chief Executive is authorised to make any ministers – the Minister of Finance and the decision and take any action, within agreed Minister of Crown Research Institutes. guidelines, to achieve Company goals. The normal term is three years with reappoint- The Chairman meets regularly with the ment for a second three-year term at the Chief Executive to discuss business issues. discretion of the shareholding ministers. The Board evaluates the Chief Executive formally The Board comprises up to nine non-executive each year. The evaluation is based on business directors. The Chairman and Deputy Chairman performance, achievement of strategic and are appointed by the shareholding ministers. operational objectives, and other non-quantitative Details of Directors are set out on page 37. objectives set out in the performance contract.

PAGE:38 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

CORPORATE GOVERNANCE CONTINUED

Audit and Risk Committee Provision of professional services The Board has one standing committee – Except in exceptional circumstances, Board the Audit and Risk Committee. It assists the members will not provide professional services Board in carrying out its responsibilities under to the Company. This is to avoid a conflict the Companies Act 1993, Public Finance Act of interest – actual or perceived. 1989, Crown Research Institutes Act 1992, No Directors provided professional services and the Financial Reporting Act 1993. to the Company during the year. Members in the last financial year were Richard Westlake (Chair), Con Anastasiou, and Michael Independent professional advice Walker. The committee operates in accordance Directors are entitled, with approval from the with a Charter which is approved by the Board. Chairman, to obtain independent professional The committee met twice during the past year advice relating to the affairs of the Company to review, and recommend to the full Board, or to their duties, at the Company’s expense. the approval of the half-yearly and annual No independent professional advice was sought financial statements. The committee also or obtained during the year. reviewed the external audit plan and external Board evaluation audit report, the Risk Assessment document, Each year the Board evaluates its own internal audit plan and internal audit reports, performance and provides the results to the and statutory compliance reporting by manage- Crown Company Monitoring Advisory Unit. ment. Minutes of the committee meetings were tabled at the subsequent Board meetings.

Innovation Committee The Innovation Committee was formed during the year to focus on commercialisation of innovations and new technologies, including GNS’s pre-seed portfolio. The committee’s membership in the last year was Mike Williams (Chair), Alexander Malahoff and the General Managers supported by the Business Development Managers. The committee met three times in the last year. Proceedings of committee meetings were discussed at subsequent Board meetings.

PAGE:39 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

REPORT OF THE AUDITOR-GENERAL

To the readers of the Financial Statements of • verifying samples of transactions and account the Institute of Geological and Nuclear Sciences balances; Limited and Group for the year ended • performing analyses to identify anomalies in 30 June 2004 the reported data; The Auditor-General is the auditor of the • reviewing significant estimates and judgements Institute of Geological and Nuclear Sciences made by the Board of Directors; Limited and Group. The Auditor-General has • confirming year-end balances; appointed me, I C Marshall, using the staff and • determining whether accounting policies are resources of Deloitte, to carry out the audit of the appropriate and consistently applied; and financial statements of the company and group, • determining whether all financial statement on his behalf, for the year ended 30 June 2004. disclosures are adequate.

Unqualified Opinion We did not examine every transaction, nor do In our opinion: we guarantee complete accuracy of the financial statements. • The financial statements of the company and group on pages 41 to 50: We evaluated the overall adequacy of the presen- – comply with generally accepted accounting tation of information in the financial statements. practice in New Zealand; and We obtained all the information and explanations – give a true and fair view of: we required to support the opinion above. - the company and group’s financial Responsibilities of the Board of Directors position as at 30 June 2004; and and the Auditor - the results of operations and cash flows The Board of Directors is responsible for preparing for the year ended on that date. financial statements in accordance with generally • Based on our examination the company and accepted accounting practice in New Zealand. group kept proper accounting records. Those financial statements must give a true and The audit was completed on 18 August 2004, fair view of the financial position of the company and is the date at which our opinion is expressed. and group as at 30 June 2004. They must also give a true and fair view of the results of The basis of the opinion is explained below. operations and cash flows for the year ended on In addition, we outline the responsibilities of the that date. The Board of Directors’ responsibilities Board of Directors and the Auditor, and explain arise from the Crown Research Institutes Act our independence. 1992, the Public Finance Act 1989 and the Basis of Opinion Financial Reporting Act 1993. We carried out the audit in accordance with the We are responsible for expressing an independent Auditor-General’s Auditing Standards, which opinion on the financial statements and reporting incorporate the New Zealand Auditing Standards. that opinion to you. This responsibility arises We planned and performed our audit to obtain all from section 15 of the Public Audit Act 2001, the information and explanations we considered section 43(1) of the Public Finance Act 1989 necessary in order to obtain reasonable assurance and section 21(1) of the Crown Research that the financial statements did not have material Institutes Act 1992. misstatements, whether caused by fraud or error. Independence Material misstatements are differences or omissions When carrying out the audit we followed the of amounts and disclosures that would affect independence requirements of the Auditor- a reader’s overall understanding of the financial General, which incorporate the independence statements. If we had found material misstate- requirements of the Institute of Chartered ments that were not corrected, we would have Accountants of New Zealand. referred to them in the opinion. Other than the audit, we have no relationship with Our audit involved performing procedures to or interests in the company or any of its subsidiaries. test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion.

Audit procedures generally include:

• determining whether significant financial and I C MARSHALL management controls are working and can be Partner, Deloitte relied on to produce complete and accurate data; On behalf of the Auditor-General, Wellington, New Zealand PAGE:40 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2004

Group Group Group Company Company Company Actual Budget Actual Actual Budget Actual 2004 2004 2003 2004 2004 2003 Note $000 $000 $000 $000 $000 $000

Revenue Crown 8 21,729 22,069 21,438 21,729 22,069 21,438 Commercial – New Zealand 9,240 8,847 8,138 9,072 8,847 7,897 – Overseas 1,976 2,056 2,031 1,976 2,056 2,031 GeoNet 8 5,942 6,098 5,220 5,942 6,098 5,220 Interest received 174 200 229 171 200 229 Other 347 96 151 347 96 151 Total Revenue 39,408 39,366 37,207 39,237 39,366 36,966

Expenses Personnel 19,637 19,120 19,092 19,637 19,120 19,092 Materials, supplies and services 2 11,531 11,393 10,146 11,350 11,393 10,030 GeoNet direct expenses 8 3,425 3,769 2,747 3,425 3,769 2,747 Depreciation 5 2,540 2,750 2,605 2,526 2,750 2,605 Interest 158 125 112 153 125 112 Total Expenses 37,291 37,157 34,702 37,091 37,157 34,586

Operating Surplus before taxation 2,117 2,209 2,505 2,146 2,209 2,380 Taxation 3 (719) (729) (839) (729) (729) (798) Surplus after taxation 1,398 1,480 1,666 1,417 1,480 1,582

STATEMENT OF MOVEMENTS IN EQUITY FOR THE YEAR ENDED 30 JUNE 2004

Group Group Group Company Company Company Actual Budget Actual Actual Budget Actual 2004 2004 2003 2004 2004 2003 $000 $000 $000 $000 $000 $000

Equity at start of year 14,523 14,240 13,607 14,439 14,240 13,607 Surplus after taxation 1,398 1,480 1,666 1,417 1,480 1,582 Less dividend paid (350) (350) (750) (350) (350) (750) Equity at end of year 15,571 15,370 14,523 15,506 15,370 14,439

The accompanying notes form part of these Financial Statements. PAGE:41 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2004

Group Group Group Company Company Company Actual Budget Actual Actual Budget Actual 2004 2004 2003 2004 2004 2003 Note $000 $000 $000 $000 $000 $000

Equity 4 15,571 15,370 14,523 15,506 15,370 14,439

Represented by: Non Current Assets Fixed assets 5 20,483 16,591 14,984 20,411 16,591 14,984 Future income tax benefit 6 43 118 157 43 118 157 Investments 10 – ––142 –– 20,526 16,709 15,141 20,596 16,709 15,141

Current Assets Cash and bank 726 141 182 600 141 155 Short term investments 689 2,000 4,123 689 2,000 4,123 EQC funds on deposit 8 1,750 – 2,186 1,750 – 2,186 Accounts receivable and prepayments 3,650 2,410 3,232 3,638 2,410 3,158 Taxation refund 409 –(59)355 –(18) Work in progress 1,202 640 569 1,164 640 531 8,426 5,191 10,233 8,196 5,191 10,135 Total Assets 28,952 21,900 25,374 28,792 21,900 25,276

Non Current Liabilities Term loan 7 3,150 1,650 1,650 3,150 1,650 1,650 Retirement leave provision 443 488 468 443 488 468 Future long service leave entitlements 393 412 412 393 412 412 3,986 2,550 2,530 3,986 2,550 2,530

Current Liabilities Accounts payable and accruals 3,145 1,530 1,561 3,050 1,530 1,547 Employee entitlements 1,690 1,900 2,531 1,690 1,900 2,531 EQC funds received in advance 8 1,750 – 2,186 1,750 – 2,186 Revenue in advance 2,810 550 2,043 2,810 550 2,043 9,395 3,980 8,321 9,300 3,980 8,307 Total Liabilities 13,381 6,530 10,851 13,286 6,530 10,837 Net Assets Employed 15,571 15,370 14,523 15,506 15,370 14,439

For and on behalf of the Board

CON ANASTASIOU RICHARD WESTLAKE 18 August 2004 18 August 2004

The accompanying notes form part of these Financial Statements. PAGE:42 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2004

Group Group Group Company Company Company Actual Budget Actual Actual Budget Actual 2004 2004 2003 2004 2004 2003 Note $000 $000 $000 $000 $000 $000

Cash flows from operating activities Cash was provided from: Receipts from customers 38,583 36,901 37,149 38,442 36,901 37,020 Interest received 174 200 229 171 200 229 38,757 37,101 37,378 38,613 37,101 37,249

Cash was applied to: Payments to suppliers and employees (33,890) (36,037) (32,671) (33,789) (36,037) (32,569) GST (net) (5) –63 (5) –63 Interest paid (153) (125) (112) (153) (125) (112) Income tax paid (1,089) (242) (330) (1,089) (242) (330) (35,137) (36,404) (33,050) (35,036) (36,404) (32,948) Net cash flow from operating activities 11 3,620 697 4,328 3,577 697 4,301

Cash flows from investing activities Cash was provided from: Sale of fixed assets 1 –41 –4 Cash was applied to: Loan to subsidiaries – ––(142) –– Purchase of fixed assets (8,097) (4,000) (3,517) (8,011) (4,000) (3,517) Net cash applied to investing activities (8,096) (4,000) (3,513) (8,152) (4,000) (3,513)

Cash flows from financing activities Cash was provided from: Bank borrowings 1,500 ––1,500 –– Cash was applied to: Dividends paid (350) (350) (750) (350) (350) (750) Net cash provided from/(applied to) financing activities 1,150 (350) (750) 1,150 (350) (750)

Net increase/(decrease) in cash held (3,326) (3,653) 65 (3,425) (3,653) 38 Add cash brought forward 6,491 5,794 6,426 6,464 5,794 6,426 Ending cash carried forward 3,165 2,141 6,491 3,039 2,141 6,464 Less EQC funds on deposit (1,750) – (2,186) (1,750) – (2,186) 1,415 2,141 4,305 1,289 2,141 4,278

Represented by: Cash and bank 726 141 182 600 141 155 Short term investments 689 2,000 4,123 689 2,000 4,123 1,415 2,141 4,305 1,289 2,141 4,278

The accompanying notes form part of these Financial Statements. PAGE:43 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

1. STATEMENT OF ACCOUNTING POLICIES

REPORTING ENTITY AND ACTIVITIES

The Institute of Geological and Nuclear Sciences Limited is established under the Crown Research Institutes Act 1992 and the Companies Act 1993. The financial statements have been prepared in accordance with section 17 of the Crown Research Institutes Act 1992, the Public Finance Act 1989 and the Companies Act 1993.

Financial statements for the Institute of Geological and Nuclear Sciences Limited (the Company) and consolidated financial statements (the Group) are presented. The consolidated financial statements comprise the Company and its subsidiaries (set out in note 10).

The principal activity of the Company is to undertake geoscience and isotope science research and consultancy, predominantly in New Zealand.

MEASUREMENT BASIS

The measurement and reporting of financial performance and financial position is based on historical cost, except for the revaluation of certain assets.

BASIS OF PREPARING CONSOLIDATED FINANCIAL STATEMENTS

Subsidiaries Subsidiaries are those entities controlled directly or indirectly by the Company. The financial statements of subsidiaries are included in the consolidated financial statements using the purchase method of consolidation.

Joint Ventures Joint ventures are joint arrangements with the other parties in which the Company has joint and several liability in respect of costs and liabilities, and shares in any resulting output. The Company’s share of the assets, liabilities, revenues and expenses of joint ventures is incorporated into the Company and consolidated financial statements on a line-by-line basis using the proportionate method.

Transactions Eliminated on Consolidation The effects of intra-group transactions are eliminated in preparing the consolidated financial statements.

PARTICULAR ACCOUNTING POLICIES

Revenue Revenue is recorded when earned, based on the percentage of work completed. Any amounts received in relation to work not yet commenced is recorded as revenue in advance.

Receivables Receivables are stated at their estimated realisable value after providing for bad and doubtful debts.

Work in Progress Work in progress is valued at the lower of cost or the percentage of work completed, less amounts invoiced. Cost includes labour, direct costs and an allocation of overhead.

Fixed Assets Fixed assets are included at cost, and have been depreciated on a straight line basis at rates calculated to allocate the assets’ cost over their estimated remaining useful lives.

PAGE:44 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

Useful lives of assets are: Buildings – wooden construction 40 years Vehicles 5 years – concrete construction 50 years Leasehold improvements 9 – 10 years Plant, machinery and equipment 3 – 15 years Patents 4 – 17 years

Income Tax The income tax expense charged to the Statement of Financial Performance includes both the current year liability and the income tax effect of timing differences calculated using the liability method.

Tax effect accounting is applied on a comprehensive basis to all timing differences. Future income tax benefits arising from timing differences are only recognised when there is virtual certainty of realisation.

Foreign Currencies Transactions in foreign currencies are converted at the New Zealand rate of exchange ruling on the date of the transaction. Monetary assets and liabilities at year end are converted to New Zealand dollars at the exchange rate ruling at balance date. All exchange differences are recorded in the Statement of Financial Performance.

Investments Investments are stated at cost.

Research and Development Costs Research costs are expensed in the Statement of Financial Performance in the period incurred. Development costs are deferred where future identifiable benefits can reasonably be expected to exceed these costs. Deferred development costs are amortised over future periods on a basis related to expected future benefits.

Library, Databases and Collections Library resources, databases and collections owned by the Company are not valued for financial reporting purposes.

Patents and Trademarks Patents and trademarks are recorded at cost and amortised over the term of their estimated useful lives.

Statement of Cash Flows Investing activities comprise the purchase and disposal of fixed assets. Financing activities include changes in equity and borrowings. Operating activities comprise the provision of research and related services and all other transactions not included under either investing or financing activities.

Financial Instruments The Company is a party to financial instruments as part of its normal operations. These financial instruments include bank accounts, short term investments, accounts receivable and payable, and bank loan. Revenue and expenses in relation to financial instruments are recognised in the Statement of Financial Performance.

Provision for Employee Entitlements Annual and long service leave are recognised as they accrue to employees. The future entitlements to long service leave are also recognised. Retirement leave accrues to employees in accordance with the provisions of the current collective employment agreement.

Changes in Accounting Policies There have been no changes in accounting policies. All policies have been applied on bases consistent with the prior year.

PAGE:45 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

2. MATERIALS, SUPPLIES AND SERVICES Group Group Company Company 2004 2003 2004 2003 $000 $000 $000 $000 Audit fees 35 33 33 33 Directors’ fees 138 116 138 116 Loss/(gain) on foreign exchange 9 (4) 9 (4) Rent 351 332 351 332 Other expenses 10,998 9,669 10,819 9,553 11,531 10,146 11,350 10,030

3. TAXATION

Operating surplus before taxation 2,117 2,505 2,146 2,380

Tax at 33% 699 827 709 786 Taxation effect of permanent differences 20 14 20 14 Adjustment in respect of prior years – (2) – (2) Total taxation charge reported 719 839 729 798

The taxation charge is represented by: Current taxation 565 762 575 721 Deferred tax 154 77 154 77 719 839 729 798

Under section ME1 of the Income Tax Act 1994, the Company is not required to maintain an Imputation Credit Account.

4. EQUITY

Authorised and Issued Capital: 6,167,000 ordinary shares 6,167 6,167 6,167 6,167 Retained earnings 9,404 8,356 9,339 8,272 15,571 14,523 15,506 14,439

All ordinary shares rank equally with respect to dividend and repayment of capital, and each carry the right to one vote at any annual general meeting.

PAGE:46 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

5. FIXED ASSETS GROUP Cost Depn Accum Book Book 2004 Depn Value Value 2004 2003 $000 $000 $000 $000 $000

Land 2,520 – – 2,520 470 Buildings 6,563 140 1,160 5,403 3,062 Leasehold improvements 1,203 101 761 442 543 Plant and machinery 1,020 68 686 334 361 Laboratory equipment 14,660 940 7,156 7,504 6,778 IT equipment and software 11,015 1,077 7,969 3,046 2,744 Furniture and fittings 1,702 112 767 935 753 Vehicles 518 57 468 50 83 Office equipment 293 37 172 121 91 Patents 169 8 41 128 99 39,663 2,540 19,180 20,483 14,984

The most recent rateable valuations as at September 2001 and July 2003 of land and buildings totalled $11,930,000 (2003: $6,860,000).

COMPANY

Land 2,520 – – 2,520 470 Buildings 6,563 140 1,160 5,403 3,062 Leasehold improvements 1,203 101 761 442 543 Plant and machinery 1,020 68 686 334 361 Laboratory equipment 14,660 940 7,156 7,504 6,778 IT equipment and software 10,929 1,063 7,955 2,974 2,744 Furniture and fittings 1,702 112 767 935 753 Vehicles 518 57 468 50 83 Office equipment 293 37 172 121 91 Patents 169 8 41 128 99 39,577 2,526 19,166 20,411 14,984

6. FUTURE INCOME TAX BENEFIT (GROUP AND COMPANY) 2004 2003 $000 $000

Opening balance 157 118 Current year movement (154) (77) Transfer from provision for tax 40 116 Closing balance 43 157

PAGE:47 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

7. TERM LOAN (GROUP AND COMPANY)

2004 2003 $000 $000 Loan from The National Bank of New Zealand Limited 3,150 1,650

Facility: Of the $7,650,000 facility in place, $3,150,000 has been drawn down.

Interest: Bank bill rate computed on the first day of that interest period plus 0.80% per annum.

Repayment Terms: Principal repayable on 31 July 2006 or earlier if mutually agreed.

Security: Negative pledge.

8. RELATED PARTY TRANSACTIONS

The ultimate shareholder of the Company is the Crown. Revenue derived from the Crown as set out in the Statement of Financial Performance includes Public Good Science Funding of $18,565,000 (2003: $18,798,000) and Non Specific Output Funding of $2,087,000 (2003: $2,105,000) from the Foundation for Research Science and Technology, and Marsden Funding of $1,077,000 (2003: $535,000) from the Royal Society of New Zealand.

The Company entered into an agreement with the Earthquake Commission (EQC) in June 2001 whereby GNS implements and operates a seismic network throughout New Zealand on their behalf, for $5 million per year for 10 years. In 2004, $5,942,000 (2003: $5,220,000) was recognised in revenue, with $3,425,000 (exclusive of personnel and overhead recoveries) spent in relation to direct costs including equipment purchases (2003: $2,747,000). As at 30 June 2004, there was $1,750,000 in revenue in advance (2003: $2,186,000). This is represented by interest-bearing term deposits.

The Group has a joint venture with Carter Holt Harvey Limited. All transactions were carried out on a commercial and arm’s length basis. The value of sales to this party was $518,000 (2003: $534,000). At 30 June, there is a receivable to the Company from the joint venture of $Nil (2003: $96,000).

In the year ended 30 June 2004, the Group commenced a joint venture with Quotable Value Limited and Niu Pacific Limited. All transactions were carried out on a commercial and arm’s length basis.

The Company undertakes many transactions with State-Owned Enterprises, Government Departments, other Crown Entities and other Crown Research Institutes. These transactions are carried out on a commercial and arm’s length basis, and it is not considered that these require related party disclosure.

9. FINANCIAL INSTRUMENTS

Credit risk The financial instruments, which expose the Company to credit risk, are principally bank balances, short term investments and accounts receivable. The Company monitors credit risk on an ongoing basis. Bank balances and short term investments are held with New Zealand registered banks in accordance with the Company’s treasury policy. A provision for doubtful debts is maintained in respect of accounts receivable, and this is reassessed on a regular basis. No collateral is held by the Company in respect of bank balances, short term investments or accounts receivable. The Company is not exposed to any concentrations of credit risk other than from the Crown and the EQC.

Currency risk The Company reduces its exposure to currency risk through the use of forward exchange contracts. There were three forward exchange contracts to purchase scientific equipment at 30 June 2004 totalling $443,602 (2003: $251,918). PAGE:48 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

Interest rate risk The interest rate risk on funds held is managed through the use of short term investments in accordance with the Company’s treasury policy. The interest rate on the term loan is set out in note 7.

Fair values There were no material differences between the fair value and carrying amounts of financial instruments at 30 June 2004 (2003: Nil).

10. INVESTMENTS

Subsidiary Balance Date Principal Activity IsoScan Limited 30 June 50% interest in True View Unincorporated Joint Venture selling non- invasive technology IsoScan Food Limited 30 June Currently non-operating. Established to hold 50% interest in MeatVision Limited Joint Venture Geological Surveys (NZ) Limited 30 June 45% interest in Property Insight Unincorporated Joint Venture selling property data

Included in the Group accounts is the Group’s share of the joint ventures as follows:

2004 2003 $000 $000

Operating (loss)/surplus after taxation (19) 84 Total Assets 160 235 Total Liabilities 95 151

11. RECONCILIATION OF SURPLUS AFTER TAXATION TO STATEMENT OF CASH FLOWS

Group Group Company Company 2004 2003 2004 2003 $000 $000 $000 $000

Surplus after taxation 1,398 1,666 1,417 1,582 Adjust non cash items: Depreciation 2,540 2,605 2,526 2,605 Deferred tax 114 (39) 114 (39) Loss on sale of assets 57 – 57 – Non current provision (44) 32 (44) 32 4,065 4,264 4,070 4,180

Add/(less) movements in working capital items: Accounts receivable (418) (221) (480) (147) Accounts payable 1,074 (95) 993 (109) Work in progress (633) (167) (633) (129) Taxation refund (468) 547 (373) 506 (445) 64 (493) 121 Net cash flow from operating activities 3,620 4,328 3,577 4,301

PAGE:49 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

12. COMMITMENTS AND CONTINGENCIES

OPERATING LEASE COMMITMENTS: 2004 2003 $000 $000

Within one year 293 271 Between one and two years 94 218 Between two and three years 11 79 Between three and four years 3 10 Five years and over 5 8 406 586

CONTRACTED CAPITAL COMMITMENTS

2004 2003 $000 $000

Contracted capital commitments 5,638 1,152

CONTINGENT LIABILITIES

The Company has contingent liabilities totalling $52,500 in relation to legal claims that may be made against the Company. The Directors are of the opinion that the Company can successfully defend these potential claims (2003: $52,500).

13. COLLECTIONS

The Company owns various collections that are an integral part of the research work undertaken by the Company. These collections are highly specialised and there is no reliable basis for establishing a valuation. They have therefore not been valued for financial reporting purposes. The two major collections are:

• The National Paleontological Collection • The National Petrology Reference Collection.

PAGE:50 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

PERFORMANCE INDICATORS FOR THE YEAR ENDED 30 JUNE 2004

Group Group Group Actual Budget Actual 2004 2004 2003

FINANCIAL PERFORMANCE MEASURES

Revenue (excluding interest received) ($000) 39,234 39,166 37,207 EBIT margin (Operating surplus before interest/Total revenue) 5.4% 5.4% 6.4% Return on equity (Surplus after taxation/Average equity) 9.3% 9.9% 11.9% Return on assets (Operating surplus before interest/Average total assets) 7.7% 9.1% 9.6% Equity ratio (Equity/Total assets) 53.8% 70.2% 57.1% Current ratio (Total current assets/Total current liabilities) 0.9:1 1.3:1 1.2:1 Gearing (refer note 7) (Term loan/Equity plus term loan) 16.8% 19.7% 10.2% Interest cover (Operating surplus before interest/Interest expense) 13 Times 17 Times 21 Times Dividend paid ($000) 350 350 750

OTHER PERFORMANCE MEASURES

Revenue from: Public Good Science Fund ($000) 18,565 18,897 18,798 Non Specific Output Fund ($000) 2,087 2,080 2,105 Marsden Fund ($000) 1,077 1,092 535 Publications: Papers – externally refereed journals/books 120 200 249 Other papers 70 50 68 Conference papers and abstracts 71 200 325 Research monographs and maps 4 99 Client reports 171 120 119 Technical reports 27 32 30 Full Time Equivalents Researchers 197 203 200 Research support 37 35 38 General support and management 40 38 35 Productivity Measures Revenue per FTE ($000) 142 142 136 Operating margin per FTE ($000) 7.7 8.0 9.2 Total assets per FTE ($000) 105 79 93 Revenue earned per $ invested in assets 1.44 1.79 1.46 Work days missed due to injury Number of work days missed 6 days 50 days 5 days Commercial Activities Revenue from commercial activities from New Zealand ($000) 9,240 8,322 8,138 Revenue from commercial activities from overseas ($000) 1,976 2,607 2,031 Revenue from GeoNet ($000) 5,942 6,098 5,220 Number of clients in excess of $150,000 revenue per annum 16 812 Significant project collaborations 36 32 37 Tertiary Education: University teaching contact hours 162 180 * Graduate scholarships funded 16 20 * Graduate students supervised 54 60 * Collaborative contracts with New Zealand universities 18 12 12 Other Non Financial Measures International fora representing New Zealand 16 13 21 Public Good Science Fund programme objectives met 98.5% 98.0% 99.7% Marsden Fund bids accepted 3 22 Training and development (% of salary Budget) 3% 3% 2%

* Measure Change PAGE:51 INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

STATEMENT OF RESPONSIBILITY

The Board and management are responsible for the preparation of the annual financial statements and the judgements used therein.

The Board and management are responsible for establishing and maintaining a system of internal control designed to provide reasonable assurances as to the integrity and reliability of the financial reporting.

In the opinion of the Board and management, the annual financial statements for the financial year fairly reflect the financial position and operations of the Group.

CON ANASTASIOU ALEXANDER MALAHOFF Chairman Chief Executive

18 August 2004

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DECLARATION OF DIRECTORS’ INTERESTS

SPECIFIC DISCLOSURES AS AT AUGUST 2004 Sarah Schiess BP Oil New Zealand Limited Con Anastasiou Employee Airways Corporation of New Zealand Limited Director Ellen Förch Airways Consulting Limited University of Auckland Director Employee Airways International Limited Cawthron Institute Director Director Med-Dev Limited Director and Shareholder GENERAL DISCLOSURES Richard Westlake 1. Insurance has been effected for Directors in Kiwibank Limited respect to any act or omission in their capacity Director as a Director of the Company. Westlake Consulting Limited Managing Director 2. Deed of Indemnity as defined in Directors’ Standards Council resolutions 17 October 1996. Chairman Horizons Regional Council APPROVAL FOR DISCLOSURE OF INFORMATION Interim Chief Executive Centre of Advanced Engineering, Approval sought and given for disclosure of University of Canterbury information to outside parties – Nil. Management Board Member

Mike Williams New Zealand Labour Party President Transit New Zealand Board Member Genesis Energy Director Enterprise Waitakere Trustee Auckland Regional Transport Authority Authority Member New Zealand Picture Company Director New Zealand Railways Corporation Director

Brenda Tahi Ngati Porou Iwi Hutt Valley District Health Board Member ACC Board Deputy Chair Nga Pae o te Maramatanga Board Member

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INTERNATIONAL LINKAGES, DATABASES AND COLLECTIONS

INTERNATIONAL LINKAGES • National Association of Geochemistry and Cosmochemistry GNS officially represents New Zealand on the • Scientific Committee of Antarctic Research (SCAR) following committees or international groups: • United Nations Convention on the • Australia New Zealand Minerals and Law of the Sea (UNCLOS). Energy Council Chief Government Geologists GNS also has strong research and collaborative Conference (ANZMEC CGGC) links with many overseas universities. • Australian Institute of Nuclear Science and Engineering (AINSE) • International Atomic Energy Agency Regional DATABASES AND COLLECTIONS Co-operative Agreement (IAEA RCA) GNS holds major databases, files, and collections • Incorporated Research Institutions in Seismology of scientific and commercial importance. Many (IRIS) are national in scope and are continuously updated. • International Energy Association (IEA) Information in these databases is crucial for research, Geothermal Experts’ Group planning and management related to land use, • International Consultative Group on the environment, earthquakes, volcanoes, geology, Food Irradiation. minerals, groundwater, the petroleum exploration GNS has formal Memoranda of Understanding industry, and the geothermal energy industry. (MOU) with the following organisations: GNS is moving significant science databases to • Chilean National Commission for Scientific a new integrated database system – GNS Online – and Technical Research (CONICYT) and providing web technology interfaces for access. • China Seismological Bureau Increasingly, we are combining and comparing • Geological Survey of Japan (GSJ) datasets to improve our understanding of • Jeonnam Regional Environmental Technology New Zealand geoscience. Development Centre (JETeC) in South Korea The databases are: • Geoscience Australia • Korean Institute of Geology, Mining and Minerals • Active faults database of New Zealand (KIGAM) • Bibliography of New Zealand geoscience • Korean National University • Cretaceous – Cenozoic geology of New Zealand • Ministry of Geology and Mineral Resources, • Digital geology database (QMAP) China (MGMR) • Geophysical properties of New Zealand database • New Energy and Technology Development • Groundwater database Organisation, Japan (NEDO) • Landscape photograph collection • Oxford University • Large landslides of New Zealand • University of Hawaii. • Marine geophysical database • Mineral resources of New Zealand These memoranda provide for the exchange of • New Zealand stratigraphic lexicon staff involved in collaborative projects as well as • New Zealand fossil record file and electronic partial funding for research initiatives. database GNS also represents New Zealand on unions • New Zealand stratigraphic column file and associations of the International Council of • New Zealand volcano database Scientific Unions (ICSU), and other international • National petrology reference collection and scientific committees, specifically: PET database • National coal geology database • ANDRILL – a multinational investigation of • New Zealand glacier inventory Antarctica’s role in Cenozoic – Recent global • New Zealand geomagnetic database environmental change • National earthquake information database • International Association of Seismology and • New Zealand strong-motion earthquake Physics of the Earth’s Interior (IASPEI) recordings • International Association of Volcanology and • Paleontological collections and database Chemistry of the Earth’s Interior (IAVCEI) • Petroleum systems database • International Union of Geological Sciences • Regional geology map and data file (IUGS) • Rock strength and classification. • International Union of Geodesy and Geophysics

PAGE:54 (IUGG) INSTITUTE OF GEOLOGICAL AND NUCLEAR SCIENCES LIMITED

DIRECTORY

DIRECTORS REGISTERED OFFICE COMMUNICATIONS MANAGER

Con Anastasiou Gracefield Research Centre John Callan (Chairman) 69 Gracefield Road Tel: +64 4 570 4732 PO Box 30-368 Mob: +64 27 440 2571 Richard Westlake Lower Hutt Email: [email protected] (Deputy Chairman) New Zealand Ellen Förch Tel: +64 4 570 1444 BANKERS Fax: +64 4 570 4600 Sarah Schiess Email: [email protected] The National Bank of Brenda Tahi New Zealand Limited

Mike Williams REGIONAL OFFICES AUDITOR Wairakei Research Centre EXECUTIVE 114 Karetoto Road Ian C Marshall Wairakei Deloitte Chief Executive Private Bag 2000 On behalf of the Dr Alexander Malahoff Taupo Auditor-General General Manager New Zealand Natural Resources Group Tel: +64 7 374 8211 SOLICITORS Dr Michael Isaac Fax: +64 7 374 8199 Email: [email protected] Minter Ellison Rudd Watts General Manager Natural Hazards Group Dunedin Research Centre Dr Terry Webb 764 Cumberland Street GNS on the web: Private Bag 1930 www.gns.cri.nz General Manager Dunedin National Isotope Centre New Zealand Dr Frank Bruhn GNS OFFICE LOCATIONS Tel: +64 3 477 4050 Chief Financial Officer Fax: +64 3 477 5232 Graham Clarke Email: [email protected]

General Manager Business Development & MARKETING MANAGERS Information Services Geohazards Rob Johnston Noel Trustrum Human Resources Manager Email: [email protected] Jennifer van Hunen Hydrocarbons Wairakei Research Centre General Manager Chris McKeown Research Email: [email protected] Dr Robin Falconer Non-invasive Scanning General Manager Technologies Strategy Joe Manning Gracefield Research Centre Dr Desmond Darby Email: [email protected]

Manager Groundwater and Geothermal Maori Strategy Tamara Tait Murray Hemi Email: [email protected]

Dunedin Research Centre

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GNS BUSINESS GROUPS AND PRINCIPAL CAPABILITIES

ORIGIN OF NEW ZEALAND’S CRUST GEOLOGICAL STRUCTURE MAPPING & SPATIAL DATA TECTONIC INFORMATION QUATERNARY PROCESSES NATURAL HAZARDS GEOHAZARD MONITORING Terry Webb EARTHQUAKE PROCESSES EARTHQUAKE ENGINEERING VOLCANOES LANDSLIDES TSUNAMIS HAZARD ASSESSMENT FINANCE HAZARD MITIGATION Graham Clarke

MAORI STRATEGY Murray Hemi

GEOLOGICAL TIME PALEOCLIMATE PALEODIVERSITY HYDROCARBONS NATURAL RESOURCES CO2 SEQUESTRATION Michael Isaac GEOTHERMAL MINERALS GROUNDWATER GEOMICROBIOLOGY OCEAN EXPLORATION

CHIEF EXECUTIVE STRATEGY Alexander Malahoff Desmond Darby

RAFTER RADIOCARBON LABORATORY RAFTER STABLE ISOTOPE LABORATORY NATIONAL ISOTOPE CENTRE WATER DATING LABORATORY Frank Bruhn ACCELERATOR MASS SPECTROMETRY ION BEAM ANALYSIS NANOTECHNOLOGY NON-INVASIVE SCANNING

RESEARCH Robin Falconer

HUMAN RESOURCES Jennifer van Hunen

COMMERCIAL SERVICES CLIENT RELATIONSHIPS MARKETING BUSINESS DEVELOPMENT INTELLECTUAL PROPERTY & INFORMATION SERVICES INFORMATION TECHNOLOGY Rob Johnston GRAPHICS PUBLICATIONS LIBRARY

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