ANNUAL REPORT 2001
HADDINGTON International Resources Limited
ACN 093 391 774 HIGHLIGHTS
• Achieved listing on the Australian Stock Exchange and completed capital raising of $3.5 million, in January 2001.
• Acquired tantalite exploration areas at Bald Hill in June 2000.
• Licence Agreement with Sons of Gwalia Limited for the development of the Bald Hill Tantalum deposit near Widgiemooltha, and the Cattlin Creek Tantalum deposit at Ravensthorpe signed in July 2000.
• Placement of shares to Sons of Gwalia Limited provides $500,000 to fund fast tracking of Cattlin Creek project development.
• Bald Hill resource increased by 41% to 1.2 million tonnes at 472 ppm Ta2O5.
• Production commenced at Bald Hill Tantalite Project in July 2001.
• First Shipment of tantalite concentrates to Sons of Gwalia Limited completed in August 2001. Annual Report 2001
1 CORPORATE OBJECTIVES AND STRATEGY
Haddington’s principal objective is to increase shareholder value by establishing itself as a reliable and profitable producer of tantalite raw materials.
The first step in achieving this objective has been to bring the Bald Hill Tantalite Project into production thereby establishing Haddington as an active participant in the tantalum industry.
The Company’s development strategy which has focussed initially on establishing production at Bald Hill, also involves investigation of the feasibility and subsequent development of Cattlin Creek, and identification of new resources on the Company’s exploration areas adjacent to the Bald Hill deposit.
The Company will continue to review opportunities to acquire new projects in the industrial minerals sector. Haddington International Resources Limited
2 CHAIRMAN & MANAGING DIRECTOR’S REPORT
CHAIRMAN & MANAGING DIRECTOR’S REPORT
It is with pleasure that we present the first Annual Report of Haddington International Resources Limited since its listing on the Australian Stock Exchange. The Company is now registered as an Australian company and has relinquished its listing on the Canadian Ventures Exchange.
Our listing on the Australian Stock Exchange was completed in January 2001, in conjunction with a capital raising to provide funds for the development of the Bald Hill and Cattlin Creek tantalite deposits.
The past year has been hectic and exciting. In 12 short months, the Company has been transformed from a junior explorer to an active producer in the exciting tantalum industry.
In July 2000, the Company entered a Licence Agreement with Sons of Gwalia Limited for the development of the Bald Hill tantalum deposit near Widgiemooltha, and the Cattlin Creek tantalum deposit at Ravensthorpe, in Western Australia.
Production at Bald Hill commenced in late July 2001, only one year on from the signing of the agreement. Equally impressive was the construction of the process plant in just 12 weeks, from ground breaking to production. After a short period of commissioning and ramp up the plant is now producing in excess of design capacity.
In the two month period to September 26th 2001, the Bald Hill Project has produced and sold over 12,000 pounds of tantalite in concentrates for income of over $800,000.
In June 2000, the Company also reached agreement for acquisition of a 100% interest in two exploration licences which are immediately adjacent to and surrounding the Bald Hill Tantalite Project. These licences are highly prospective and provide real potential for the discovery of additional tantalite resources at Bald Hill.
The ore resource at Bald Hill has been expanded by 41% during the year to 1.2 million tonnes of tantalite ore grading 479 ppm Ta2O5. This has had the effect of expanding the term of our Licence Agreement with Sons of Gwalia Limited to approximately six years.
In conjunction with the development of the Bald Hill Project, the Company has also been actively advancing development of the Cattlin Creek Tantalite Project.
Work at Cattlin Creek has focussed on the implementation of the feasibility assessment for the project. Detailed metallurgical testing has been carried out, additional resource definition drilling has been completed and compilation of data for the Notice of Intent to Mine has been completed. The Notice of Intent to Mine has been lodged with relevant authorities for their consideration.
Production from Cattlin Creek is scheduled to commence as planned by the end of the first quarter of 2002.
Once the Cattlin Creek Project is commissioned, the combined production with Bald Hill will be approximately 300,000 pounds of tantalite per annum, generating revenues for Haddington of $19.5 million per annum.
The progress achieved by the Company during the year is a direct result of the skills, commitment and loyalty of our staff and the contribution from our highly skilled consultants and contractors. The Board of Directors extends its sincere thanks to them for their support.
We also thank our shareholders for their support and we look forward to an equally exciting and a profitable coming year.
Colin McCavana Chairman & Managing Director Annual Report 2001
3 REVIEW OF OPERATIONS
OVERVIEW
During the year, Haddington completed the transition to producer through the successful development of the Bald Hill Tantalite Project. The Company is now one of only three tantalite producers in Western Australia and realisation of our production forecasts could see Haddington producing up to 5% of the world’s annual tantalite raw material production within the next 12 months.
Under its Licence Agreement with Sons of Gwalia Limited, Haddington is responsible for development of the Bald Hill tantalum deposit near Widgiemooltha, and the Cattlin Creek tantalum deposit at Ravensthorpe, in Western Australia. Haddington will develop and operate the mines, delivering all tantalum and tin concentrates produced from the deposits to Gwalia.
The current combined resources from the Bald Hill Project and the Cattlin Creek Project amount to approximately 1.5 million tonnes of ore at an average grade of 489 ppm Ta2O5 , with a resource life of approximately six years at scheduled throughput.
The exploration potential of the Bald Hill area adds another dimension to the current project and we believe it will contribute to a significant improvement in the Bald Hill resource, which in turn will add to the longevity of the project and the Company’s production future. Preliminary independent evaluation of existing data indicates significant potential for discovery of tantalite bearing pegmatites in the exploration areas.
The Company’s development strategy is to supplement production from Bald Hill with production from Cattlin Creek by the end of the first quarter of 2002. In addition, an exploration programme will be carried out on the prospective Bald Hill, Bald Hill Extended, Madoonia and Sinclair areas
Mining of the Cattlin Creek deposit is expected to take two years. Unless further resources are discovered, the Company then proposes to move the plant to Bald Hill to treat ore from Bald Hill Extended, Madoonia and Sinclair areas.
This move would sustain the Company’s tantalite production at approximately 300,000 pounds per annum. In addition, exploration success at the Bald Hill, Bald Hill Extended, Madoonia and Sinclair areas has the potential to significantly extend the life of the Bald Hill Project.
Laverton Geraldton W E S T E R N A U S T R A L I A
I Menzies N Eneabba D
I A Kalgoorlie/Boulder Moora N
Southern Cross BALD HILL South Australia
O TANTALITE
C PROJECTS E PERTH Eucla A Norseman
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CATTLIN CREEK N TANTALITE E A Collie O C PROJECT Ravensthorpe N E R T H Esperance U S O
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Haddington International Resources Limited Project location map
4 REVIEW OF OPERATIONS
WHAT IS TANTALITE?
Tantalite is the ore of the metal tantalum. Over the past few decades tantalum has been transformed from a minor by-product of tin mining to a valuable resource as a direct result of strong growth in consumption. The development of tantalum capacitors, initially for military applications and more recently for use in the manufacture of portable electronic equipment, has led to growth averaging over 10% per year since 1992. The growth in demand for tantalum capacitors is expected to continue at these levels.
Tantalum has unique electronic properties. It has a very high melting point, high corrosion resistance and good alloying properties making it suitable for use in a growing number of new and highly sophisticated applications including electronic components, aerospace, metal working machinery and chemical equipment. Its excellent resistance to most forms of chemical attack also makes it ideal for use in medical applications such as surgical repairs of human bones (eg, in skull plates), as foil or wires to connect torn nerves, and as woven gauze to bind up abdominal muscles.
Approximately 60% of tantalum produced is used in the electronics industry, mainly in the production of capacitors which are essential for the miniaturisation of electrical equipment such as mobile phones and lap top computers. Tantalum capacitors have become the standard for reliable performance in electronic systems. They combine compactness and high efficiency with prolonged shelf life. With continued steady growth in personal communications systems, demand for tantalum units from this sector is expected to remain strong.
About 25% of tantalum usage is in the metal working industry where properties such as heat resistance and strength result in varied applications for tantalum carbide alloys, including specialised cutting tools.
Tantalum carbide is generally used in alloys in conjunction with such metals as tungsten, titanium and columbium.
In aerospace, tantalum’s high melting point, strength at high temperatures and resistance to corrosion produce refractory superalloys with cobalt, iron and nickel. These alloys are employed in aerospace structures, jet engines and gas turbine parts.
BALD HILL MINE
The Company’s flagship mine is located at Bald Hill, approximately 60km southeast of Kambalda and approximately 70km east of Widgiemooltha in the Coolgardie Mineral Field of Western Australia.
Regional geology of the area comprises Archaean amphibolites and felsic tuffs which have been intruded by small stocks of granite, bodies of greisen and pegmatites. Small amounts of cassiterite, tantalite, beryl and lithium bearing pegmatite hosted minerals have previously been mined on a small scale from surface material at a number of locations in the area.
The project had been evaluated a number of times since 1983, however, low prices for tantalum precluded a development decision. Recent demand for tantalum has had a positive effect on market price which, in turn, has improved the economics of the project.
The agreement with Sons of Gwalia is a fixed price take or pay arrangement that effectively insulates Haddington from variations in market price.
The tantalite resource at Bald Hill now stands at 1,140,000 tonnes @ 472 ppm Ta2O5, containing approximately 1,186,000 pounds of Ta2O5.
The total resource at Bald Hill has been increased by 41% during the year. As a consequence, the life of the project increased to almost six years at the design throughput of 200,000 tonnes per annum. The additional resource has the potential to generate a substantial increase in revenue and profit for an already robust project. Annual Report 2001
5 REVIEW OF OPERATIONS
The treatment plant at the Bald Hill Mine has been designed on the following key criteria:
• nominal 200,000 tonnes per year throughput.
• continuous operation.
• average feed grade of 472 grammes Ta2O5 per tonne of ore. • recovery of a minimum 65%.
• final concentrate grade of 7.5% Ta2O5.
The Bald Hill Mine comprises three small pits (North, South and West). Mining has commenced in the North pit and is carried out by a mining contractor using 40 tonne articulated dump trucks and a 65 tonne excavator. The mining is carried out on a campaign basis with sufficient ore for one year’s production being mined in approximately six months.
Crushing of the run of mine ore is also carried out by a contractor, who provides fine ore for plant feed at particle size less than 12 millimetres.
The Bald Hill process plant was designed and constructed in house by Haddington staff, consultants and contractors and was brought on line on schedule and within budget.
The plant uses conventional gravity separation in spirals to recover the tantalite from the ore. The fine ore from the crushing contractor is fed to the plant using a front end loader. It is then conveyed to a vibrating screen where particles less than 1.5 millimetre are taken off and pumped direct to a spiral circuit. The oversize ore from the vibrating screen is then crushed in a vertical shaft impact crusher and re-conveyed to the vibrating screen, where minus 1.5 millimetre particles are again removed to the spiral circuit.
Tantalite concentrate is collected from the spirals, pumped to another spiral set for cleaning, then collected in drums for transport to Sons of Gwalia.
2800mE 3000mE 290mRL 270mRL 5400mN 5325mN
Orebody 290mRL N Pit outline 270mRL 5200mN 5250mN
Pit Outline 290mRL
270mRL 5000mN 5175mN 0 200m Haul road 290mRL
4925mN 270mRL INITIAL PIT DESIGN 290mRL
4850mN 270mRL 0 100m 290mRL
4775mN 270mRL
2700mE 2800mE2900mE 3000mE 3100mE 3200mE
Haddington International Resources Limited Cross section and pit layouts — Bald Hill Project
6 REVIEW OF OPERATIONS
Lighter particles from the tailings of the spirals are directed to the ball mill where they are ground to liberate any tantalite locked up in composite particles and again passed over a spiral set. Tantalite concentrate is cleaned and collected in drums for shipment to Sons of Gwalia.
Tailings from the process are pumped to the tailings dam for storage.
The workforce at Bald Hill comprises 17 employees and up to 17 contractors, who are accommodated on site in the Company’s camp facility.
Mining ROM Ore F.E.L Jaw Crusher
Process Cone Water Crusher Sizing Screen +12mm Sizing Screen F.E.L
+1.0mm -12mm
VSI -1.0mm Crusher Fine Ore Feeder Bin Stockpile
Dewatering Classification Fines Rougher Fines Cleaner Cyclone Cyclone Spirals Spirals
Ball Mill
Scalping Regrind Spirals Spirals
Cleaner Recleaner Spirals Spirals
Dryer To Tails Dam
Final Concentrate To Sons of Gwalia (drum load-out) (Greenbushes) Bald Hill process flow diagram
CATTLIN CREEK TANTALUM PROJECT
The Company’s second project at Cattlin Creek is located approximately 2km north of the town of Ravensthorpe, approximately 540 km south of Perth, in the Phillips River Goldfield of Western Australia.
The Cattlin Creek pegmatite forms a large tabular body on the western side of the Ravensthorpe greenstone belt, close to the contact between the mafic volcanics and the Ravensthorpe quartz diorite.
The pegmatite is typically 8-12m thick but pods to over 20m. It can be traced along strike over 500m while its down dip limits have not been defined. The pegmatite has a mineralised zone that comprises extremely high- grade tantalum lenses and patches within a lower grade envelope.
Similar to the history of the Bald Hill Project, the Cattlin Creek pegmatite has been the subject of previous feasibility studies by others, however, primarily due to low tantalite prices, a development decision was never made.
In its assessment of the viability of the Cattlin Creek Tantalite Project, Haddington carried out a review of the previous feasibility studies. The assessment indicated the presence of a small resource of 212,000 tonnes at 638 ppm tantalite. However, a high strip ratio of 8.86 to 1 appeared to preclude immediate development of the project. Annual Report 2001
7 REVIEW OF OPERATIONS
Haddington arranged an independent review of data and application of a cut off grade in line with its contract tantalite price. As a result, the mineable resource was upgraded to 363,000 tonnes at 520 ppm tantalite at a strip ratio of 4.2 to 1.
This significant improvement in resource estimate has provided a renewed level of confidence in the Company’s ability to profitably mine the Cattlin Creek deposit.
During the year, Haddington has been engaged in collecting data and confirming metallurgical performance as part of a feasibility assessment of the Cattlin Creek Project.
Independent testwork on large diameter core drilled at Cattlin Creek has been carried out to establish key metallurgical criteria for the design process. These criteria were previously based on information available from detailed metallugical studies of the Bald Hill deposit carried out by Gwalia and others.
In addition a series of PQ diamond holes were drilled across the resource to collect approximately 2 tonnes of sample. The sample was processed at AMMTEC laboratories in Perth. The testwork has verified the findings of previous testwork and has enabled finalisation of the process design.
The Directors consider that the Cattlin Creek Project is evolving as a stand alone resource which could be mined profitably and which could contribute substantially to the profits of the Company.
As a measure of its confidence in the project Haddington has carried out many of the statutory functions required to bring the project to production, including flora and fauna studies, aboriginal heritage study, design of tailing dam and engineering for realignment of the Old Newdegate Road, which passes through the property.
A Notice of Intent to Mine at Cattlin Creek has been prepared and lodged with the relevant statutory authorities.
The Company is now finalising the feasibility assessment for the project and expects to commence the detailed design and tendering for plant construction in the December quarter. The plant will have the same design criteria as the Bald Hill facility and will be of similar construction.
240mRL
0 200m
200mRL Orebody 1600mN 1640mN Haul road Pit outline Pit Outline 240mRL 1400mN N 200mRL INITIAL PIT 1600mN DESIGN 4800mE 5000mE 5200mE
240mRL
0 100m 200mRL 1460mN
240mRL
200mRL 1400mN
4900mE 5000mE 5100mE 5200mE 5300mE
Haddington International Resources Limited Cross sections and pit layouts — Cattlin Creek Project
8 REVIEW OF OPERATIONS
BALD HILL EXTENDED
The Bald Hill Extended prospect comprises four Mining Licence applications, over an area of approximately 19 square kilometres, abutting the northern, western and southern boundaries of the Bald Hill project.
Previous exploration in the area has produced some highly encouraging results for primary and secondary tantalite and tin mineralisation. The prospect area contains a suite of pegmatite dykes that occur over a strike length of about 10 kilometres. The secondary accumulations of tantalite in alluvial/eluvial cover material also occur over a wide area.
Haddington has identified two areas for immediate follow-up evaluation and proposes to undertake staged exploration programs for both primary and secondary tantalite mineralisation in the coming year.
MADOONIA PROSPECT
The Madoonia project comprises Exploration Licence, E15/665, which is made up of 53 graticular blocks to the North of the Bald Hill Extended Prospect. Haddington holds a 100% interest in the project.
The Madoonia Prospect is in the very early stage of exploration but the presence of pegmatite dykes over a significant strike length indicates that it has the potential to host tantalite mineralisation.
Haddington proposes to commence staged exploration programs to evaluate the potential of the project area to host tantalite and tin mineralisation in the coming year.
THE SINCLAIR PROSPECTS
The Sinclair Prospects comprise two Prospecting Licences and an Exploration Licence over an area of approximately 12 km2 immediately adjacent to the two Prospecting Licences, approximately 15km north of its Bald Hill Tantalite Project.
The area is in a line of strike with the Bald Hill deposit and is considered by the Company’s geologist to be prospective for tantalite bearing pegmatites. Haddington intends to commence basic exploration of the areas in conjunction with its Bald Hill Extended prospect.
SIAVONGA URANIUM PROJECT
Haddington holds an exclusive prospecting licence (PLLS 130) covering 2,000 km2 in southern Zambia.
The Company is actively seeking joint venture or farmout opportunities for the project. Annual Report 2001
9 REVIEW OF OPERATIONS
EXPLORATION PROPERTIES - LIBERIA
Haddington has applied for 5 exploration licences for gold, diamonds and base metals over 2,300km2 to replace previously held reconnaissance licences in Liberia.
The Company has completed a programme of work on the Liberian propertiescomprising of a detailed review of all available data including the results of the work undertaken by others and a field assessment of the logistics the area. This work identified the most favourable exploration targets and focus areas for consolidation to exploration licences.
The political situation in Liberia has deteriorated significantly over the past twelve months with sanctions imposed by the United Nations and a general feeling of unrest brought about by accusations of Liberian support for rebels in neighbouring Sierra Leone and Guinea.
Haddington is currently seeking joint venture or farmout opportunities for the Liberian projects.
OTHER PROJECTS
The Board and management of Haddington continue to look for and review other development and exploration opportunities in the specialty minerals area. The Board has an open mind with regard to the commodities considered in this process. However, it is felt that exploration opportunities should focus on tantalite, while development projects should be medium scale advanced properties, carrying low technical and other risks, but with fast track development potential. Haddington International Resources Limited
10 DIRECTORS’ REPORT FOR THE EIGHT MONTHS ENDED 30 JUNE 2001
The directors have pleasure in presenting their report together with the financial statements of Haddington International Resources Limited (“Haddington” or “the Company”) for the eight months ended 30 June 2001.
DIRECTORS
The names of the directors of the Company in office at any time during or since the end of the financial period are:
Colin McCavana – Managing Director, appointed 19 September 1999 Mr McCavana has over 25 years world wide management experience in earthworks, construction and mining industries, many of which have been related to acquisition, development and operation of mineral recovery projects.
John Tarrant – Non executive Director, appointed 15 January 1999 Mr Tarrant has held senior executive positions with a number of mineral exploration and oil and gas companies in Australia and overseas. He has 20 years experience and has worked in London, Melbourne and Perth.
Jacqueline Tucker – Non executive Director, appointed 15 January 1999 Ms Tucker has 25 years of public practice experience as an auditor and adviser to public companies. After several years as a partner with an international firm, Ms Tucker commenced her own firm which focuses on development stage enterprises primarily in the resource, biomedical and high-tech sectors and acts as a consultant to other chartered accountancy firms in her area of expertise.
James Pearson – Non executive Director, appointed 29 August 2001 Mr Pearson is a consulting mining engineer based in Perth, with 25 years of experience on projects in Australia and overseas
PRINCIPAL ACTIVITIES
The principal activities of the Company during the period was the development of tantalum production facilities to mine existing tantalum deposits under an agreement with Sons of Gwalia Ltd (“Gwalia”) to mine Gwalia’s Bald Hill and Cattlin Creek tantalum deposits.
REVIEW OF OPERATIONS
During the period the Company’s focus was the development of production activities at the Bald Hill Tantalum Project, under a Licence Agreement with Gwalia.
STATE OF AFFAIRS
On 10 November 2000 the Company lodged a prospectus with the Australian Securities and Investments Commission and was admitted to the Official List of the Australian Stock Exchange on 8 January 2001. The Company raised a total of $3,510,123 pursuant to the Prospectus through the issue of 17,550,615 ordinary shares at 20 cents each.
On 4 January 2001 the Company raised $500,000 through the issue of 2,500,000 ordinary shares to Gwalia by way of a private placement.
In March 2001 the Company raised a total of $552,895 through the issue of 3,071,641 shares on conversion of share purchase warrants.
In May 2001, the Company changed its financial year end to 30 June annually. As a consequence the Company will report its results in respect of the eight month period ended 30 June 2001 in this financial report.
The Company’s shares were voluntarily de-listed from the Canadian Venture Exchange on 29 June 2001. Annual Report 2001
11 DIRECTORS’ REPORT FOR THE EIGHT MONTHS ENDED 30 JUNE 2001
RESULT OF OPERATIONS
The operating loss after income tax for the eight month period ended 30 June 2001 was $844,424 (2000: $445,311 - 12 months).
LIKELY DEVELOPMENTS
The Company has completed the development of tantalite production facilities at Bald Hill and has commenced mining operations in accordance with it’s Licence agreement with Gwalia, as well as continuing development at Gwalia’s Cattlin Creek property, and exploration activities at its own mineral properties.
DIVIDENDS
No dividend has been paid or declared for the financial period ended 30 June 2001.
ENVIRONMENTAL REGULATION
The Company is committed to achieving a high standard of environmental performance. The board is responsible for regular monitoring of environmental exposures and compliance with environmental regulations. The Company complied with its environmental performance obligations at all times during the period.
AUDIT COMMITTEE
The audit committee consists of the following Directors:
Colin McCavana John Tarrant Jacqueline Tucker
The audit committee’s business was, at all times during the period, conducted in accordance with the principles set out in the Corporate Governance Statement.
The audit committee met once during the period ended 30 June 2001 and all members of the audit committee were present.
EVENTS SUBSEQUENT TO BALANCE DATE
At the date of this report, the Directors are not aware of any other matter or circumstance not otherwise dealt with in this report or the financial statements, that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years other than the following:
(i) The Company commenced production of tantalite concentrate from the Bald Hill project following commissioning in July 2001 and made its first shipment to Gwalia on 1 August 2001.
INDEMNIFICATION OF OFFICERS AND AUDITORS
The Company has not, during or since the financial period, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Haddington International Resources Limited
12 DIRECTORS’ REPORT FOR THE EIGHT MONTHS ENDED 30 JUNE 2001
OPTIONS
During the period to the date of this report, the Company did not grant any options over unissued ordinary shares to the directors as part of their remuneration.
At the date of this report the ordinary shares of the Company under option and warrant were:
Type Expiry Date Exercise Price No. Shares AUD Option 31 December 2002 $0.20 1,000,000 Option 3 June 2004 $0.22 58,480 Option 19 August 2004 $0.27 43,860 Option 26 May 2005 $0.20 563,820
Note that some options currently on issue are convertible into ordinary shares at prices denominated in Canadian dollars. As at the date of this report, the AUD / CAD exchange rate was 0.79059.
DIRECTORS’ INTERESTS
The following table sets out the directors relevant interests in shares, options and warrants in the Company or a related body corporate as at the date of this report.
Director Fully Paid Options Ordinary Shares Colin McCavana 894,500 1,281,640 John Tarrant 1,091,000 281,640 Jacqueline Tucker 365,426 102,880 James Pearson 150,000 -
DIRECTORS MEETINGS
Of the 6 directors’ meetings held during the financial period ended 30 June 2001 the details of directors attending were as follows:
Director Date Appointed No. of Meetings No. of Meetings Held Attended Colin McCavana 19/8/99 6 6 John Tarrant 15/1/99 6 6 Jacqueline Tucker 15/1/99 6 6 James Pearson 29/8/01 0 0
In addition 8 circular resolutions were passed during the period. Annual Report 2001
13 DIRECTORS’ REPORT FOR THE EIGHT MONTHS ENDED 30 JUNE 2001
DIRECTORS AND EXECUTIVES REMUNERATION
The Directors and Executives are remunerated based on the provision of consulting services provided to the Company for executive management and for their services as Directors and Executive Officers. Directors fees are determined by the Company in general meeting, and other consulting services are set, as described in the Corporate Governance Statement.
Details of remuneration provided to Directors and Executives during the financial period are as follows:
Consulting Services Options Total Directors Colin McCavana 129,250 –(1) 129,250 John Tarrant 31,440 – 31,440 Jacqueline Tucker 13,216 – 13,216 Executives Colin McCavana 129,250 – 129,250 John Tarrant 31,440 – 31,440
(1) The issue of a total of 1,000,000 options to Colin McCavana was approved by shareholders at the AGM of the company held on 15 June 2001. These options exercisable at 20 cents each on or before 31 December 2002, were not issued or allotted until after the end of the financial period. The value of these options using the Black & Scholes model is $22,700.
Signed in accordance with a resolution of the Directors made pursuant to Section 298(2) of the Corporations Act 2001.
On behalf of the Directors,
Dated at Perth on this 24th day of September, 2001.
Colin McCavana Director Haddington International Resources Limited
14 CORPORATE GOVERNANCE STATEMENT
During the period the Directors adopted a statement of Corporate Governance Guidelines as set out below, outlining the main corporate governance policies which the Directors have adopted.
Role of the Board The Board’s primary role is the protection and enhancement of long-term shareholder value. To fulfill this role, the Board is responsible for the overall corporate governance of the Company, including its strategic direction, establishing goals for management and monitoring the achievement of these goals.
Board Processes The Board has established a number of committees of the Board including a Remuneration Committee and an Audit Committee. The effectiveness of each committee is periodically monitored. The Board has also established a framework for the management of the Company including a system of internal control and the establishment of appropriate ethical standards.
The full Board currently holds several meetings each period, as may be necessary to address any specific significant matters that may arise.
The Board conducts an annual review of its processes to ensure that it is able to carry out its functions in the most effective manner.
Composition of the Board The composition of the Board is determined using the following principles:
• the Board should comprise at least three directors. This number may be increased where it is felt that additional expertise is required in specific areas;
• the Board should include at least one independent non-executive director.
The Board has accepted the following definition of an independent director:
An independent director is a director who is not a member of management (a non-executive director) and who:
• is not a substantial shareholder of the Company or an officer of, or otherwise associated, directly or indirectly, with a substantial shareholder of the Company;
• has not within the last three years been employed in an executive capacity by the Company or been a director after ceasing to hold any such employment;
• is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company;
• The Board should comprise directors with a broad range of expertise both nationally and internationally
Directors should serve for a maximum of ten years and all directors should retire by the age of 70.
The composition of the Board is reviewed on an annual basis to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board will appoint a suitable candidate who must stand for election at the next general meeting. Annual Report 2001
15 CORPORATE GOVERNANCE STATEMENT
Director Dealings in Company Shares The Constitution permits Directors to acquire shares in the Company. Company policy prohibits directors from dealing in Company shares whilst in possession of price sensitive information.
Directors must notify the Company Secretary once they have bought or sold shares in the Company or exercised options or warrants over ordinary shares. In accordance with the provisions of the Corporations Law and the regulations of the Australian Stock Exchange and the Canadian Venture Exchange, directors are responsible to advise both Exchanges of any transactions conducted by them in shares in the Company.
Independent professional advice Each Director has the right to seek independent professional advice at the Company’s expense. However, prior approval of the Chairman is required, which is not unreasonably withheld. A copy of advice received by the director must be made available to all other members of the Board.
Remuneration Committee The role of the Remuneration Committee is to review remuneration packages and policies applicable to the Managing Director, senior executives and directors themselves. This role also includes responsibility for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies. Remuneration levels are competitively set to attract and retain the most qualified and experienced directors and senior executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages.
The Remuneration Committee meets as required.
Audit Committee The Audit Committee must include at least all current non-executive directors. The role of the Committee is to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the consolidated entity.
It also gives the Board of Directors additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies for financial reporting.
The internal and external auditors and other advisors and management are invited to Audit Committee meetings at the discretion of the Committee.
The responsibilities of the Audit Committee include:
• reviewing the financial report and other financial information distributed externally;
• reviewing any new accounting policies to ensure compliance with applicable accounting standards and generally accepting accounting principles;
• reviewing external audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have been identified appropriate and prompt remedial action is taken by management;
• liaising with the external auditors and ensuring that the annual statutory audits are conducted in an effective manner;
• monitoring the establishment of an appropriate internal control framework and considering enhancements;
• monitoring the establishment of appropriate ethical standards; Haddington International Resources Limited
16 CORPORATE GOVERNANCE STATEMENT
• monitoring the procedures in place to ensure compliance with the Corporations Law and Stock Exchange Listing Rules and all other regulatory requirements;
• addressing any matters outstanding with auditors, Australian Taxation Office, Australian Securities and Investments Commission, Australian Stock Exchange and financial institutions;
• reviewing reports on any major defalcations, frauds and thefts from the Company;
• improving the quality of the accounting function;
• reviewing the declaration from the Company Secretary on compliance with statutory responsibilities.
The Audit Committee reviews the performance of the external auditors on an annual basis and meets with them during the year as necessary.
Internal Control Framework The Board acknowledges that it is responsible for the overall internal control framework but recognises that no cost effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control framework, the objective of which is to minimise the risk of the occurrence of errors and irregularities.
Ethical Standards All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.
The Role of Shareholders The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders as follows:
• annual financial reports distributed to all shareholders;
• other financial reports are sent to any shareholder who request them;
• proposed major changes in the Company which may impact on share ownership rights are submitted to a vote of shareholders;
• notices of all meetings of shareholders.
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company’s strategy and goals. Important issues are presented to the shareholders as single resolutions.
The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options and shares to directors and changes to the Constitution. Copies of the Constitution are available to any shareholder who requests it. Annual Report 2001
17 STATEMENT OF FINANCIAL PERFORMANCE FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
Note 8 Month Year ended period ended 31 October 2000 30 June 2001 $$ Revenues from ordinary activities 2 87,171 8,767 Interest expense (104) - Salaries, wages and consulting fees (197,886) (82,807) Occupancy, office and administrative expenses (66,743) (49,262) Write down of mineral properties (508,234) (124,125) Depreciation of property, plant and equipment (8,164) - Corporate expenditure and professional fees (118,134) (99,480) Other expenses from ordinary activities (31,690) (8,846) Foreign exchange loss (640) (89,558)
Loss from ordinary activities before income tax expense (844,424) (445,311) Income tax expense relating to ordinary activities 4 - -
Loss from ordinary activities after related income tax expense (844,424) (445,311)
Total changes in equity other than those resulting from transactions with owners as owners (844,424) (445,311)
Basic loss per share (cents per share) 3 (2.9) (5.5)
The Statement of Financial Performance is to be read in conjunction with the notes to the financial statements set out pages 21 to 34. Haddington International Resources Limited
18 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2001
Note 30 June 2001 31 October 2000 $$ CURRENT ASSETS Cash 5 1,716,393 159,565 Receivables 6 344,872 43,835 Inventories 7 225,872 - Deposits and prepayments 8 30,110 63,042
TOTAL CURRENT ASSETS 2,317,247 266,442
NON-CURRENT ASSETS Investments 9 3,358 3,358 Fixed assets 10 51,687 - Mineral properties 11 4,071,158 1,067,625
TOTAL NON-CURRENT ASSETS 4,126,203 1,070,983
TOTAL ASSETS 6,443,450 1,337,425
CURRENT LIABILITIES Accounts payable 12 1,310,212 249,294 Hire purchase liabilities 13 96,220 - Other 14 15,956 72,017
TOTAL CURRENT LIABILITIES 1,422,388 321,311
NON CURRENT LIABILITIES Hire purchase liabilities 15 550,948 - Other 16 2,430 -
TOTAL NON CURRENT LIABILITIES 553,378 -
TOTAL LIABILITIES 1,975,766 321,311
NET ASSETS 4,467,684 1,016,114
EQUITY Contributed equity 17 5,312,108 7,700,138 Accumulated losses 18 (844,424) (6,684,024)
TOTAL SHAREHOLDERS’ EQUITY 4,467,684 1,016,114
The Statement of Financial Position is to be read in conjunction with the notes to the financial statements set out on pages 21 to 34. Annual Report 2001
19 STATEMENT OF CASHFLOWS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
Note 8 Month Year ended period ended 31 October 2000 30 June 2001 $$ Cash flow from operating activities Interest (net) 87,067 8,736 Payments to suppliers and employees (944,560) (256,641)
Net cash used in operating activities 23(b) (857,493) (247,905)
Cash flows from investing activities Proceeds from sale of investments - 295 Expenditure on mineral properties (1,803,682) (607,281) Expenditure on property, plant and equipment (59,851) -
Net cash used in investing activities (1,863,533) (606,986)
Cash flows from financing activities Prepaid share issue costs - 63,042 Repayment of borrowings - (17,533) Proceeds from issue of shares 4,278,494 866,606
Net cash provided by financing activities 4,278,454 912,115
Net increase in cash held 1,557,468 57,224 Effects of exchange rate changes on the balance of cash held in foreign currency (640) - Cash at the beginning of the financial year 159,565 102,341
Cash at the end of the financial year 23(a) 1,716,393 159,565
The Statement of Cashflows is to be read in conjunction with the notes to the financial statements set out on pages 21 to 34. Haddington International Resources Limited
20 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted in the preparation of this financial report are:
(a) Basis of Preparation The financial report is a general purpose financial report which has been drawn up in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. They have been prepared on the basis of historical costs and do not take into account changing money values or, except where stated, current valuations of non-current assets.
The accounting policies are consistent with those of the previous year.
(b) Taxation
Income Tax The Company adopts the liability method of tax effect accounting.
Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the balance sheet as a future income tax benefit or a provision for deferred income tax.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain.
(c) Non-current assets The carrying amounts of all non-current assets are reviewed at least annually to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds the recoverable amount, the asset is written down to the lower value. In assessing recoverable amounts, the relevant cashflows have not been discounted to their present value.
(d) Accounts payable Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Company.
(e) Employee entitlements
Executive share option plan The Company granted options to certain executives under an executive share option plan. Further information is set out in Note 22 to the financial statements. Other than the costs incurred in administering the schemes which are expensed as incurred, the scheme does not result in any expense to the Company. Annual Report 2001
21 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(f) Inventories Inventories are carried at the lower of cost and net realisable value.
Mining activities Cost is allocated on an average basis and includes direct material, labour, related transportation costs to the point of sale and other fixed and variable overhead costs directly related to mining activities.
Net realisable value Net realisable value is determined on the basis of the normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and deducted to establish net realisable value.
(g) Exploration, evaluation and development expenditure Exploration, evaluation and development costs are accumulated in respect of each separate area of interest.
Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
Development costs related to an area of interest are carried forward to the extent that they are expected to be recouped either through sale or successful exploitation of the area of interest.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future.
Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward exploration, evaluation and development costs are amortised on a units of production basis over the life of the economically recoverable reserves.
Depreciation is charged over the shorter of the expected useful life of the physical assets, or the life of the mine. Depreciation is calculated on a straight line basis so as to write off the net cost over its expected useful life. Depreciation commences at the time the asset is ready for use. The following estimated useful lives are used in the calculation of depreciation; Motor Vehicles 3 – 5 years; Camp 5 years; Plant & Equipment 3 – 10 years.
Provisions are made for mine site rehabilitation and restoration on an incremental basis during the course of mine life (which includes mine closure phase). Provisions, which are determined on an undiscounted basis, include the following costs: reclamation, plant closure, waste site closure and monitoring activities. These costs have been determined on the basis of current costs. Current legal requirements and current technology. Changes in estimates are dealt with on a prospective basis.
Significant uncertainty exists as to the amount of restoration obligations which will be incurred due to the following factors:
(i) uncertainty as to the remaining life of existing operations;
(ii) the impact of changes in environmental legislation.
Assumptions have been made as to the remaining life of existing sites based on studies conducted by independent technical advisors. Such studies are conducted at least once in every 3 year period. Haddington International Resources Limited
22 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(h) Financial Instruments Issued by the Company
Transaction Costs on the Issue of Equity Instruments Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.
Interest and Dividends Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments.
(i) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services (GST), except:
(i) where the amount of GST incurred is not recoverable from the taxation authority or recognised as part of the cost of acquisition of an asset or as part of an item of expense, or
(ii) for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
(j) Receivables Trade receivables and other receivables are recorded at amounts due less any provision for doubtful debts.
(k) Revenue Recognition
Sale of Goods Revenue from the sale of goods is recognised when the Company has passed control of the goods or other assets to the buyer.
Interest Income Interest income is recognised as it accrues.
(l) Comparative Figures The Company has adopted the presentation and disclosure requirements of Accounting Standards AASB 1018 “Statement of Financial Performance”, AASB 1034 “Financial Report Presentation and Disclosure” and AASB 1040 “Statement of Financial Position” for the first time in the preparation of this financial report. In accordance with the requirements of these new/revised Standards, comparative amounts have been reclassified in order to comply with the new presentation format. The reclassification of comparative amounts has not resulted in a change to the aggregate amounts of current assets, non-current assets, current liabilities, non-current liabilities or equity, or the net profit or loss of the Company as reported in the prior year financial report.
In May 2001, the Company changed its financial year end to 30 June annually. As a consequence this financial report details the financial performance of the Company in respect of the eight month period ended 30 June 2001. Comparative figures are in respective of the 12 month period ended 30 October 2000. Annual Report 2001
23 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
8 Months ended Year ended 30 June 2001 31 October 2000 $$
2. LOSS FROM ORDINARY ACTIVITIES
Loss from ordinary activities before income tax has been determined after:
(a) Operating revenue: Interest received 87,171 8,767
(b) Expenses - Interest expense 104 - - Loss on sale of investments - 152 - Legal fees 33,572 31,087 - Foreign exchange loss 640 89,558 - Write down of resource properties 508,234 124,125 - Depreciation of non current assets 8,164 - - Operating lease payments 24,064 11,938
3. EARNINGS PER SHARE
Basic earnings (loss) per share (cents per share) (2.9) (5.5) No. of Shares Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share 28,628,835 8,117,812
Diluted earnings per share is not materially different from basic earnings per share and therefore is not disclosed in the financial statements.
4. INCOME TAX
(a) Income Tax Benefit Prima facie income tax benefit calculated at 34% on the operating loss (2000: 36%) 287,105 160,312 Increase (decrease) in income tax benefit due to non assessable/non tax deductible items: - Legal fees 1,488 (22,028) - Write down resource properties (172,800) (44,685) - Foreign exchange loss (218) (21,075) Future income tax benefit not taken to account 115,575 72,524
Income Tax Expense - - Haddington International Resources Limited
24 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
8 Months ended Year ended 30 June 2001 31 October 2000 $$
4. INCOME TAX (cont’d)
(b) The directors estimate that at 30 June 2001 the potential future income tax benefit in respect of tax losses not taken to account (at 30%) is: 157,057 68,495
(c) The benefit of future income tax benefit not brought to account will only be obtained if: (i) the Company derives future assessable income of a nature and an amount sufficient to enable the benefit from the tax losses to be realised; (ii) the Company continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) no changes in tax legislation adversely affect the Company realising the benefit from the deductions for the losses.
5. CASH ASSETS
Cash at bank and on hand 1,716,393 159,565
6. RECEIVABLES
Trade and other receivables 29,766 3,255 Goods and services tax recoverable 315,106 40,580
344,872 43,835
7. INVENTORIES
Ore stockpile 225,872 -
8. DEPOSITS AND PREPAYMENTS
Security deposit 5,661 5,661 Prepaid capital raising expenses - 57,381 Other prepayments 24,449 -
30,110 63,042
9. INVESTMENTS
Listed investments at cost 3,358 3,358 Annual Report 2001
25 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
8 Months ended Year ended 30 June 2001 31 October 2000 $$
10. PROPERTY, PLANT AND EQUIPMENT
Gross carrying amount Balance at 31 October 2000 - - Additions 59,851 - Balance at 30 June 2001 59,851 -
Accumulated depreciation Balance at 31 October 2000 - - Depreciation expense 8,164 - Balance at 30 June 2001 8,164 -
Net Book Value 51,687 -
11. MINERAL PROPERTIES
(a) Exploration and evaluation expenditure at cost: Carried forward from previous period 1,067,625 384,469 Incurred during the period 266,769 807,281 1,334,394 1,191,750 Written off during the period (508,234) (124,125) Transferred to Development expenditure (599,134) - Exploration expenditure carried forward to subsequent periods 227,026 1,067,625 Development expenditure at cost: Carried forward from previous period – – Transferred in from exploration and evaluation 599,134 – Incurred during the year 3,244,998 - Development expenditure carried forward to subsequent periods 3,844,132 - Total mineral properties (b) 4,071,158 1,067,625
(b) Mineral properties are made up of the following items at 30 June 2001: Plant and equipment 2,827,147 – Motor Vehicles 173,268 – Camp facilities 477,491 – Administration 11,337 – Project development expenditure 354,889 – Total Mineral Properties 3,844,132 –
The recovery of the costs of expenditure carried forward is dependent upon the discovery of commercially viable mineral and other natural resource deposits and their development and exploration or alternatively their sale. The Company’s title to certain mining tenements is subject to Ministerial approval and may be subject to successful outcomes of native title issues. (Refer Note 26). Amortisation of development costs will commence in the next financial period once production of tantalite concentrate commences. Haddington International Resources Limited
26 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
8 Months ended Year ended 30 June 2001 31 October 2000 $$
12. ACCOUNTS PAYABLE
Trade creditors 1,310,212 249,294
13. HIRE PURCHASE LIABILITIES - CURRENT
Hire purchase liabilities (Note 28 ) 96,220 -
Secured by assets subject to hire purchase, the current market value of which exceeds the value of the finance lease liability.
14. OTHER CURRENT LIABILITIES
Subscriptions received 12,131 72,017 Employee entitlement provisions 8,435 - Other current liabilities (4,610) - 15,956 72,017
Number of employees at the end of the financial period 7 -
15. HIRE PURCHASE LIABILITIES - NON CURRENT
Non current Hire Purchase liabilities (Note 28) 550,948 -
Secured by assets subject to hire purchase, the current market value of which exceeds the value of the finance lease liability.
16. OTHER NON CURRENT LIABILITIES
Long service leave provision 2,430 -
17. CONTRIBUTED EQUITY
Issued and paid up capital 35,348,851 (2000:11,505,762) ordinary shares, fully paid 5,312,108 7,700,138
Movements in share capital: Balance at the beginning of the financial year 7,700,138 6,633,532 Shares issued: • Exercise of 3,704,974 warrants at C$ 0.15 per share 647,845 – • Issue of 17,550,615 Shares at $ 0.20 each pursuant to Prospectus 3,510,123 – • Cost of issue of shares pursuant to Prospectus (379,474) – • Issue of 2,500,000 shares at $0.20 each pursuant to a private placement 500,000 – • Issue of 87,500 shares in settlement of a legal dispute 17,500 – • Reduction of capital as approved by shareholders on 15 June 2001 (Note 18 (a)) (6,684,024) – • Exercise of 87,720 options at C$0.18 per share – 18,104 • Exercise of 29,240 options at C$ 0.22 per share – 7,228 • Exercise of 67,434 options at C$ 0.16 per share – 12,546 • Exercise of 1,666,667 warrants at C$ 0.15 per share – 285,742 • Issue of 3,221,727 Shares for cash at C$ 0.15 per share – 542,986 • 800,000 Shares issued at C$0.20 each in consideration of resource properties – 200,000 Balance at the end of the period 5,312,108 7,700,138
Amounts identified as C$ are Canadian Dollars Annual Report 2001
27 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
17. CONTRIBUTED EQUITY (cont’d)
Options The Company had on issue the following options as at 30 June 2001 issued to Directors and Employees of the Company pursuant to the “Haddington Resources Ltd Stock Option Plan”: Number Exercise Price (1) Expiry Date 58,480 $0.18 3 June 2004 43,860 $0.22 19 August 2004 623,976 $0.16 26 May 2006
(1) Note that exercise prices of all options on issue are denominated in Canadian dollars. (2) The issue of 1,000,000 options to Colin McCavana approved by shareholders at the Annual General Meeting on 15 June 2001 were not allotted or issued as at 30 June 2001. These options are exercisable at 20 cents each on or before 31 December 2002. 8 Months ended Year ended 30 June 2001 31 October 2000 $$
18. ACCUMULATED LOSSES
Accumulated losses at the beginning of the period (6,684,024) (6,238,713) Net loss for the period (844,424) (445,311) Losses applied against share capital (a) 6,684,024 -
Accumulated losses at the end of the period (844,424) (6,684,024)
(a) Following resolution of the shareholders of the Company on 15 June 2001 the accumulated losses of the Company as at 31 October 2001 totalling $6,684,024 were applied against contributed capital as a reduction in capital. (Refer Note 17).
19. DIRECTORS’ REMUNERATION
(a) The numbers of directors whose incomes from the Company or a related entity were within the specified bands are as follows: $ No. No. 10,000 - 19,999 1 – 30,000 - 39,999 1 – 40,000 - 49,999 – 1 80,000 - 89,999 – 1 120,000 - 129,999 1 – 140,000 - 149,999 – 1 Amount relating to directors of the Company received, or due and receivable, from: The Company and related parties in connection with the management of the Company. $173,906 $ 277,309 Haddington International Resources Limited
28 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
19. DIRECTORS’ REMUNERATION (cont’d)
(b) Remuneration of Executives The aggregate remuneration of all executive officers of the Company, including the Directors as disclosed in Note 19(a), whose remuneration for the financial period is $100,000 or more, being remuneration received or due and receivable, directly or indirectly, from the Company or a related party in connection with the management of the affairs of the Company, whether as an executive officer or otherwise is $129,250 (2000: $148,770). This amount was in respect of the one executive whose remuneration exceeded $100,000.
(c) Transactions with Director related entities Consultancy, accounting and general management services have been provided by entities associated with Mr John Tarrant, Mr Colin McCavana and Ms Jacqueline Tucker during the financial period. These amounts have been included in the disclosures above. The transactions were undertaken under normal commercial terms.
20. FINANCIAL REPORTING BY SEGMENTS
The Company operated in the mineral exploration and development industry in Australia, Africa and Canada at all times during the period.
Geographical Segments Revenue Segment Result Segment Assets 2001 Australia 87,067 (322,974) 6,415,985 Africa - (508,234) - Canada - (13,216) 27,465
Consolidated 87,067 (844,424) 6,443,450
Geographical Segments Revenue Segment Result Segment Assets 2000 Australia 8,767 (347,551) 857,241 Africa - - 468,490 Canada - (97,760) 11,694
Consolidated 8,767 (445,311) 1,337,425
21. AUDITORS’ REMUNERATION
Amounts received or due and receivable for audit services by: $$ - auditors (Australia) 25,576 20,950 - auditors (Canada) - 1,064
25,576 22,014 Annual Report 2001
29 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
22. RELATED PARTY TRANSACTIONS
Directors The names of each person holding the position of Director of Haddington International Resources Limited during the period were: Colin McCavana John Tarrant Jacqueline Tucker Directors Interests The directors held the following shares and options in the company as at 30 June 2001. Ordinary Shares Unlisted Options Colin McCavana 884,500 281,640 (1) John Tarrant 1,091,000 281,640 Jacqueline Tucker 305,270 163,036 Directors remuneration is disclosed at Note 19 (a) & (b). Other transactions with Directors are disclosed at Note 19 (c). (1) A total of 1,000,000 options were approved by shareholders to be issued to Colin McCavana following the Annual General Meeting on 15 June 2001. These were issued subsequent to the end of the financial period under review.
23. NOTES TO STATEMENT OF CASHFLOWS
(a) For the purposes of the statements of cash flows, cash includes on hand and in banks, and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the balance sheet as follows:- 8 Months ended Year ended 30 June 2001 31 October 2000 $$ Cash at bank and on hand 1,716,393 159,565 Cash per statement of cash flows 1,716,393 159,565
(b) Reconciliation of operating loss after income tax to net cash used in operating activities Operating loss after income tax (844,424) (445,311) Adjustments for non-cash income and expense items: Loss on sale of investments - 152 Non cash settlement of legal dispute 17,500 – Depreciation of property, plant and equipment 8,164 – Write down of resource projects 508,234 124,125 Foreign exchange (gain) / loss 640 (54,067) Changes in assets and liabilities - Increase in receivables (301,036) (32,389) - Increase in creditors and accruals – 159,585 - Increase in inventories (225,872) – - Decrease in deposits and prepayments 32,932 – - Decrease in other creditors and accruals (56,061) – - Increase in other non current liabilities 2,430 – Net cash used in operating activities (857,493) (247,905)
(c) Non-cash transactions: The following non-cash transactions have been excluded from the statement of cashflows: (i) During the period the Company issued 87,500 shares at a deemed price of $0.20 each totalling $17,500 in settlement of a legal dispute. Haddington International Resources Limited
30 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
24.FINANCIAL INSTRUMENTS
(a) Interest Rate Risk Exposures The exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities comprises:
2001 Note Floating Fixed Non- Total Weighted interest interest interest Average rate rate bearing Int. Rate $ $$$$$ Financial Assets Cash 5 1,712,833 – 3,560 1,716,393 4.76% Receivables 6 – – 344,872 344,872 – Deposits & prepayments 8 – – 30,110 30,110 – Investments 9 – – 3,358 3,358 – 1,712,833 - 381,900 2,094,733 Financial Liabilities Accounts payable 12 – – 1,310,212 1,310,212 – Hire purchase liabilities - Current 13 – 96,220 – 96,220 8% Hire purchase liabilities - Non-current 15 – 550,948 – 550,948 8% Other current liabilities 14 – – 15,956 15,956 – Other non-current liabilities 16 – – 2,430 2,430 – – 647,168 1,328,598 1,975,766 Net financial assets 1,712,833 (647,168) (946,698) 118,967
Reconciliation of net financial assets to net assets: 2001 Reference $ Note Net financial assets as above 118,967 Non financial assets and liabilities: Inventories 7 225,872 Fixed assets 10 51,687 Mineral properties 11 4,071,158 Net assets per balance sheet 4,467,684 Annual Report 2001
31 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
24.FINANCIAL INSTRUMENTS (cont’d)
2000 Note Floating Non- Total Weighted interest interest Average rate bearing Int. Rate $$$$$ Financial Assets Cash 6 159,565 – 159,565 6.25% Receivables 7 – 43,835 43,835 – Deposits & prepayments 8 – 63,042 63,042 – Investments 9 – 3,358 3,358 – 159,565 110,235 269,800 – Financial liabilities Accounts payable 11 – 249,294 249,294 – Other 13 – 72,017 72,017 – 321,311 321,311 – Net financial assets 159,565 (211,076) (51,511)
Reconciliation of net financial assets to net assets: 2000 Reference $ Note Net financial assets as above (51,511) Non financial assets and liabilities: Mineral properties 10 1,067,625 Net assets per balance sheet 1,016,114
(b) Credit Risk Exposures Credit risk refers to the risk that a counterpart will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted the policy of only dealing with credit worthy counterparts and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults.
The Company is developing tantalum production facilities under an exclusive offtake agreement with Sons of Gwalia Ltd to produce tantalite concentrate from two of Sons of Gwalia Ltd’s mineral properties. Subsequent to the end of the financial period, the Company derived revenues from production of tantalite. All tantalite is sold to Sons of Gwalia Ltd pursuant to the Company’s exclusive contract with Sons of Gwalia Ltd, hence the company has credit risk exposure to the Company’s only customer, Sons of Gwalia Ltd.
The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Company’s maximum exposure to credit risk.
(c) Net Fair Values of Financial Assets and Liabilities The carrying amounts of financial assets and liabilities equal their estimated net fair value.
25.SUBSEQUENT EVENTS
The Company commenced production of tantalite concentrate from the Bald Hill project following commissioning in July 2001 and made its first shipment to Gwalia on 1 August 2001.
Apart from the foregoing, there has not arisen any transaction or event of a material nature likely, in the opinion of Directors to significantly affect the nature of the operations of the Company subsequent to the end of the financial year. Haddington International Resources Limited
32 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
26.CONTINGENT LIABILITIES
In June 1992 the High Court of Australia held in the Mabo case that the common law of Australia recognises a form of native title. The full impact that the Mabo decision may have on tenements held by the Company is not yet known. The Company is aware of native title claims that have been lodged with the National Native Title Tribunal (“the Tribunal”) over several areas in Western Australia in which the Company holds interests. The native title claims have been accepted by the Tribunal for determination under section 63(1) of the Native Title Act 1993 (Commonwealth).
27.COMMITMENTS FOR EXPENDITURE
In order to maintain an interest in the mining and exploration tenements in which the Company is involved, the Company is committed to meet the conditions under which the tenements were granted and the obligations of any joint venture agreements. The timing and amount of exploration expenditure commitments and obligations of the Company are subject to the minimum expenditure commitments required as per the Mining Act, as amended, and may vary significantly from the forecast based upon the results of the work performed which will determine the prospectivity of the relevant area of interest.
a) Capital Expenditure The Company is involved in the development of tantalite production facilities at its Bald Hill project, requiring significant capital expenditure. At 30 June 2001, all of the Company’s capital expenditure commitments have been brought to account as Accounts payable (see Note 12).
b) Exploration Work The company has certain obligations to perform minimum exploration work and expend minimum amounts of money on its mining tenements. The obligations are expected to amount to: (i) Tenements held within Australia: Obligations for the next 12 months are expected to amount to $ 132,699. No estimate has been given of expenditure commitments beyond 12 months as this is dependant on the directors ongoing assessment of operations and in certain instances Native Title negotiations. (ii) Tenements held with Zambia: Obligations for the next 2 years are expected to amount to $ Nil. No estimate has been given of expenditure commitments beyond 2 years as it has not been reliably determined by the company. (iii) Tenements held within Liberia: No commitments are currently outstanding. Future commitments have yet to be negotiated by the Company with the appropriate government authority in Liberia. The aggregate amount payable not later than one year as at balance date is $132,699 (2000: $236,363). Financial commitments for subsequent periods will be determined at a future date.
(c) Operating Lease On 3 October 2000, the company entered into a two year operating lease for the office premises. The commitment in respect of this lease is:
No later than 1 year $20,940 Later than 1 year and not later than 5 years $6,980 Longer than 5 years Nil Annual Report 2001
33 NOTES TO THE FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED 30 JUNE 2001
28. HIRE PURCHASE COMMITMENTS
Hire Purchase Agreements Hire purchase agreements relate to plant and equipment at the Bald Hill project with terms of no longer than four years. The Company will acquire the plant and equipment at the conclusion of the respective agreements.
8 Months ended Year ended 30 June 2001 31 October 2000 $$ Hire Purchase Liabilities No later than one year 96,220 – Later than one year and not later than five years 550,948 –
647,168 –
Included in the financial statements as: Current hire purchase liabilities (Note 13) 96,220 – Non current hire purchase liabilities (Note 15) 550,948 –
647,168 – Haddington International Resources Limited
34 DIRECTORS DECLARATION
DIRECTORS DECLARATION
The directors of Haddington International Resources Limited hereby declare that:
(a) the financial statements and notes set out on pages 18 to 34 are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Company as at 30 June 2001 and of it’s performance, as represented by the results of it’s operations and it’s cash flows, for the eight month period ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations; and
(b) there are reasonable grounds that the company will be able to pay its debts when they become due and payable.
Dated at Perth this 24th day of September, 2001.
Signed in accordance with a resolution of the directors made pursuant to Section 295(2) of the Corporations Act 2001.
On behalf of the Directors:
Colin McCavana Director Annual Report 2001
35 INDEPENDENT AUDIT REPORT TO THE MEMBERS OF HADDINGTON INTERNATIONAL RESOURCES LIMITED Haddington International Resources Limited
36 ADDITIONAL ASX INFORMATION
Schedule of Mineral Properties Tenement No. Holder/ Shares Status Expiry Registered and Type Applicant Held Date Encumbrances BALD HILL - WIDGIEMOOLTHA E15/497 Ruane 100 Granted 07/07/97 06/07/02 None ELA15/665 Tyson 100 Pending (applied 01/11/99) N/A None G15/17 Ruane 100 Granted 23/01/01 22/2/2001 None MLA 15/1353 Haddington 100 Pending (applied 22/12/00) N/A None MLA 15/1354 Haddington 100 Pending (applied 22/12/00) N/A None MLA 15/1355 Haddington 100 Pending (applied 22/12/00) N/A None MLA 15/1356 Haddington 100 Pending (applied 22/12/00) N/A None PLA 15/4452 Haddington 100 Pending (applied 17/4/01) N/A None PLA 15/4453 Haddington 100 Pending (applied 17/4/01) N/A None P15/4107 Haddington 100 Granted 6/6/00 5/6/04 None P15/4108 Haddington 100 Granted 6/6/00 5/6/04 None ELA 15/717 Haddington 100 Pending (applied 23/3/01) N/A None ELA 15/4454 Haddington 100 Pending (applied 17/4/01) N/A None ELA 15/4455 Haddington 100 Pending (applied 17/4/01) N/A None
ZAMBIA LS 130 Haddington 100 Prospecting Licence granted 8/12/02 None
LIBERIA Application Haddington 100 Application N/A None
Key to Tenement Type: Key to Parties: E – Exploration Licence Ruane – Michael Ruane ELA – Exploration Licence Application Tyson – Tyson Resources Ltd GPLA – General Purpose Lease Application PLA – Prospecting Licence Application MLA – Mining Lease Application Annual Report 2001
37 ADDITIONAL SHAREHOLDER INFORMATION AS AT 19 SEPTEMBER, 2001
Shareholder Details The issued capital of the company as at 19 September 2001 consists of 35,409,007 fully paid ordinary shares and 1,666,160 unlisted options over the unissued capital of the company.
Distribution of Shareholdings and Option holder as at19 September 2001 Fully Paid Ord Shares Number of holders 764 Percentage holdings by twenty largest holders 49.2% Holders of less than a marketable parcel 207
Number of holders in the following distribution categories:
Unlisted Options Fully Paid Ordinary Shares 0 - 1,000 – 32 1,001 - 5,000 – 175 5,001 - 10,000 – 175 10,001 - 100,000 – 334 100,001 and over 3 48
3 764
Twenty Largest Shareholders - Fully Paid Shares The names of the twenty largest shareholders are as follows: No. of Ord Shares % 1 Sons of Gwalia Limited 2,500,000 7.1% 2 Mr Roger Stuart Clarke 2,000,000 5.6% 3 CDS & Co NCI Account 1,694,242 4.8% 4 Ms Patricia Fitzhardinge and Mr Michael Fitzhardinge
38 ADDITIONAL SHAREHOLDER INFORMATION AS AT 19 SEPTEMBER, 2001 (cont’d)
Substantial Shareholders In accordance with Section 709(1) of the Corporations Act 2001, the company had been notified of the following substantial shareholders:
(a) Sons of Gwalia Ltd has a relevant interest in 2,500,000 ordinary shares which represent 7.2% of the issued ordinary shares.
(b) Mr Vernon Wheatley has a relevant interest in 1,973,333 ordinary shares which represent 5.6% of the issued ordinary shares.
Details with Respect to Directors’ Shareholdings as at 19 September 2001 The interest as at 19 September 2001 of the directors in the shares, options and warrants of the company are as follows: Director Ordinary Shares Unlisted Options Colin McCavana 894,500 1,281,640 John Tarrant 1,091,000 281,640 Jacqueline Tucker 365,426 163,036 James Pearson 150,000 -
Restricted Securities A total of 800,000 fully paid ordinary shares held by Mr Michael Ruane are under escrow until 27 September 2001.
Voting Rights Ordinary Shares On a show of hands every member present in person or by proxy or attorney or being a corporation by its authorised representative who is present in person or by proxy, shall have one vote for every fully paid ordinary share of which he is a holder.
Unlisted Options During the financial period no options were issued. During the same period no options were converted into ordinary fully paid shares.
Options have no voting rights until such options are exercised as fully paid ordinary shares.
Unlisted Warrants During the financial year no warrants were issued. During the same period 3,071,641 warrants were converted into ordinary fully paid shares and a total of 246,667 warrants expired. Annual Report 2001
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