Annual Report 2005
Admiralty Resources NL Admiralty Resources NL is a Public Company listed on WKH $XVWUDOLDQ 6WRFN ([FKDQJH ZLWK GLYHUVLÀHG PLQHUDO interests in Chile, Argentina and Australia. The Company is focussing on the development of the Japonesa iron ore mines in Chile and the Rincon Salar in Argentina.
Highlights for 2005
•Commencement of design and construction of Rincon Salar mines in Argentina for production by February 2007
•Acquisition of Chile iron ore joint venture in March 2005 and SURJUHVVWRZDUGVÀUVWVDOHLQ-DQXDU\
•Commencement of design and construction of mining plants in Chile
The 2005 Annual Report provides an overview of • Several wholly owned entities. These are Admiralty Resources’ main operating activities for 6ROJROG 3W\ /LPLWHG $'< 5HVRXUFHV /LPLWHG the year ended 30th June 2005. *UHDWHU $XVWUDOLDQ *ROG 1/ 0RRQOLJKW 0LQLQJ 1/ 7KUHH 6WDU 0LQLQJ 1/ DQG )RUWXQH *OREDO ,QDGGLWLRQWRWKHÀQDQFLDOUHSRUWWKHDQQXDO Holdings Limited. report contains more detailed information in an appendix titled Supplementary Information.
Solgold Admiralty Resources Group Structure Pty Limited
The Admiralty Resources’ group comprises:
• Admiralty Resources NL (ACN 010 195 972) Three ADY Star Mining Resources Limited which is the parent company of the Admiralty NL Resources Group. Admiralty Resources NL • The major operating companies. These include a 49% interest in the Chilean joint
venture company Sociedad Contractual Minera Greater Fortune Global Australian Gold NL Santa Barbara and ADY Resources Limited Holdings Limited (owner of the Argentinian resources including Moonlight the Rincon Salar tenements). Mining NL Contents
Ulexite Boric Acid Drill Hole Brine Salt Lake Iron ore Stock pile Argentina Rincon Salar Sociedad Contractual Minera Santa
Admiralty Resources NL A.C.N. 010 195 972 Chairman’s Report ...... 4 Directors Professor J Ross Harper Directors’ Report...... 5 Phillip Thomas Anthony J Dickson Auditor’s Independence Declaration...... 14 Secretary Stephen C Prior Corporate Governance Statement...... 15 5HJLVWHUHG2IÀFH c/- Prior & Co Pty Limited Schedule of Mining Tenements ...... 22 /HYHO4XHHQ6W Melbourne VIC 3000 Australia 6WDWHPHQWRI)LQDQFLDO3HUIRUPDQFH ...... 24 Tel: +61 3 9670 1838 )D[ 6WDWHPHQWRI)LQDQFLDO3RVLWLRQ...... 25 Principal Place of Business /HYHO4XHHQ6WUHHW 6WDWHPHQWRI&DVK)ORZV ...... 26 Melbourne VIC 3000 Australia
Tel: +61 3 9642 3535 1RWHVWRWKH)LQDQFLDO6WDWHPHQWV...... 27 )D[ Directors’ Declaration...... 54 Auditors Deloitte Touche Tohmatsu /HYHO *URVYHQRU3ODFH Independent Audit Report...... 55 *HRUJH6WUHHW Sydney NSW 2000 Australia Additional information for listed companies...... 58 Lawyers Mallesons Stephen Jaques Supplementary Information ...... 61 /HYHO*RYHUQRU3KLOOLS7RZHU )DUUHU3ODFH Sydney NSW 2000 Australia
Bankers For more information about Macquarie Bank/ Westpac Banking Corporation Admiralty Resources visit us at Share Registry www.ady.com.au Computer Share Investor Services Pty Limited
Securities Quoted Australian Stock Exchange Limited (ASX) Code - ADY (shares) Admiralty Resources NL 2005 Annual Report 3 Chairman’s Report
3URIHVVRU-5RVV+DUSHU&%( Director and Chairman of the Board
It gives me pleasure to report on the activities of iron ore prices that increased by 71% in April this your company in a year that has seen substantial year and record levels of consumption of pig iron progress and change. I was appointed to the board and steel in China and elsewhere in the world. in March 2005 and elected chairman by the Board I would like to thank our joint venture partner in Chile of Directors. 0U/HRQDUGR)DUNDV.OHLQIRUKLVRQJRLQJHIIRUWV These are exciting times for the group. We have and committment. I would also like to thank my moved from being focused on exploration to being fellow directors for their dedication and hard work. focused on production. Our Argentinian operations continue at a rapid pace Consistent with moving to the design of the plant and with plans and funding in place to build a world class production phase we have engaged several senior lithium chloride facility. SURGXFWLRQSHUVRQQHO1RWDEO\ZHKDYHDSSRLQWHG We have put in place arrangements to raise some Dr Carlos Sorentino as director of technical services A$8.75 million in equity (through the exercise of in Argentina. His experience and credentials are impeccable and he is progressing our brine resource RSWLRQVJUDQWHGLQ'HFHPEHU ORDQIDFLOLWLHVRI A$6 million and leasing facilities of A$13 million SURGXFWLRQDQGRWKHUSURMHFWVDWDUDSLGSDFH which is adequate to meet our projected capital and As part of our corporate governance we have put in operating expenditure requirements. SODFHDGLUHFWRUV·FRGHRIFRQGXFWDQRFFXSDWLRQDO I look forward to meeting you at our annual general KHDOWK DQG VDIHW\SROLF\HQYLURQPHQWDO SROLF\ meeting to be held in Sydney on 29 November a directors share acquisition policy (that allows 2005. directors to acquire shares for up to 45 days after each six monthly result is published) and an audit 7KLV \HDU 'HORLWWH 7RXFKH 7RKPDWVX 6\GQH\ RIÀFH completed our audit. Professor J Ross Harper Our joint venture with Wyndham Explorations S.A. Chairman in Sociedad Contractual Minera Santa Barbara will EHWKHÀUVWSURMHFWWRJHQHUDWHLQFRPH7KLVSURMHFW has a very promising outlook due to currently high 4 Admiralty Resources NL 2005 Annual Report Directors’ Report Rincon Salar Southern view towards extinct volcano Phillip Thomas Managing Director The directors of Admiralty Resources NL present Mr Phillip Thomas BSc MBM AIG SIA aff the annual fi nancial report on the Company and the consolidated entity for the fi nancial year ended Managing Director 30 June 2005. In order to comply with the provisions Mr Thomas became a director of Admiralty of the Corporations Act 2001, the directors report Resources on 22 April 2003 and was appointed as as follows: Managing Director on 18 August 2004. Mr Thomas commenced his career working for the Control Directors Data Mining Centre as a consultant specialising in drill hole analysis and computer based exploration The names and particulars of the directors of the and mine applications. Subsequently he worked Company at any time during or since the end of the in the investment banking and asset management fi nancial year are: industries. Mr Thomas was the managing partner of Professor J Ross Harper LLB MA D Univ CBE Panopus Partners, a marketing strategy fi rm, prior to taking up his role with Admiralty Resources. Chairman of Directors Mr Thomas is an Associate member of the Australian Professor Harper was appointed to the Board on the Institute of Geoscientists. He holds a Bachelor 29 March 2005. Professor Harper holds a Bachelor of Science degree majoring in geology from the of Laws and Master of Arts degrees from Glasgow Australian National University, and a Master University. He was awarded an Honorary Doctorate of Business (Marketing) degree from Monash for services to Law at Glasgow University in 2002. University. Professor Harper is an Emeritus Professor of Law at Strathclyde University and was awarded a CBE for public and political services in 1986. Admiralty Resources NL 2005 Annual Report 5 Mr Anthony Dickson %&RP//%//0&$)7,$ Mr Anthony Dickson Appointed on: 18 August 2004 Director (Non-Executive) Professor J Ross Harper Mr Dickson was appointed to the Board as a Appointed on: 29 March 2005 non-executive director on the 18 August 2004. 8WLOLVLQJKLVÀQDQFHDQGOHJDOH[SHUWLVH0U'LFNVRQ Company Secretary successfully designed and implemented substantial SURMHFWÀQDQFHDQGVWUXFWXUHGÀQDQFHWUDQVDFWLRQV The following person held the position of Company LQYROYLQJ$XVWUDOLDQ8QLWHG.LQJGRP8QLWHG6WDWHV 6HFUHWDU\DWWKHHQGRIWKHÀQDQFLDO\HDU and New Zealand organisations. Mr Stephen C Prior B.Com (Melb) CA 0RVW UHFHQWO\ KH ZDV HQJDJHG E\ (UQVW Mr Edge was a director and consultant to the 1RGLYLGHQGVZHUHSDLGGXULQJWKH\HDUQRUDUHDQ\ Company from April 2000 to the date of his recommended at 30 June 2005. resignation. Mr Edge held the positions of Chief ([HFXWLYH2IÀFHU DQG &KDLUPDQ RI WKH %RDUG XQWLO Review of Operations 18 August 2004 when he tendered his resignation with the company. Overview 7KH'LUHFWRUVKDYHEHHQLQRIÀFHVLQFHWKHVWDUWRI $NH\VWUDWHJ\IRUWKHFRPSDQ\RYHUWKHODVWÀQDQFLDO WKHÀQDQFLDO\HDUWRWKHGDWHRIWKLVUHSRUWH[FHSW year has been to focus on reducing risk via its for: GLYHUVLÀFDWLRQ LQWR VHYHUDO PLQHUDO SRUWIROLRV 7KH logic behind this approach has been to reduce the 0U)DQN(GJH ULVN RI DGHFOLQHLQSURÀWDELOLW\FDXVHGE\F\FOLFDO Resigned on: 18 August 2004 GHPDQGVDQGRUHSULFHÁXFWXDWLRQV Mr Shane Mulcahy Resigned on: 31 March 2005 6 Admiralty Resources NL 2005 Annual Report The Company has several valuable brine and ore resources from which it intends to extract: • Iron ore • Potassium chloride • Sodium sulphate • Boric acid • Lead oxide and lead sulphide Sodium Sulphate at Cauchari - Argentina • Zinc oxide and zinc sulphide Santa Barbara has acquired two new mining 7KH FRPSDQ\ KDV ÀYH PDMRU PLQLQJ SURGXFWLRQ tenements near Vallenar in Chile. These tenement SURVSHFWV QDPHO\ OLWKLXP FKORULGH SRWDVVLXP acquisitions are Pampa Tololo and Serro Varilla and FKORULGH LURQ RUH VRGLXP VXOSKDWH DQG ERULF contain iron ore which will be mined in conjunction acid. It will continue to develop these in pursuit of with the existing nine tenements. GLYHUVLÀFDWLRQRILWVPLQHUDOSRUWIROLR7KHFRPSDQ\ currently has a option agreement with Cougar Metals Rincon Salar – Argentina NL to mine nickel and cobalt at its Pyke Hill deposit in Western Australia. The Rincon Salar is our large brine lake deposit in WKH3XQD$UJHQWLQDFRQWDLQLQJYDOXDEOHFRPSRXQGV The company will not be reliant on the income in solution. We have decided to focus our efforts on streams generated from the sale of any one resource the extraction of lithium which offers the highest or fashionable mineral as demand for minerals in revenue potential. This multi-elemental brine different industries invariably change through time. resource is located in the Salta Province of Argentina Lithium in its compound state is one of the most and is close to two of the largest producers of lithium prospective minerals to mine in light of future energy carbonate and potash in the world. The Rincon Salar applications. tenements which cover an area in excess of 250 Demand for lithium continues to be extremely strong VTXDUHNLORPHWUHVZHUHDFTXLUHGLQ)HEUXDU\ especially in the lithium cobalt/new electrolyte 7RGDWHVTXDUHNLORPHWUHVKDYHEHHQGULOOHGDQG EDWWHU\ VHFWRU GULYHQ E\ JURZWK LQ QRWHERRN tested. We announced a JORC compliant estimate FRPSXWHUWHFKQRORJ\FDPHUDDQGHOHFWURQLFVDOHV RI WKH UHVRXUFH EHLQJ WRQQHV RI OLWKLXP ,QDGGLWLRQ/LWKLXPXVDJHFRQWLQXHVWRJURZLQWKH equivalent metal. DXWRPRWLYH SKDUPDFHXWLFDO SRO\PHUV FHUDPLFV We also intend to extract potassium chloride from DQG HQHUJ\ LQGXVWULHV OLWKLXP FDUERQDWH OLWKLXP WKH5LQFRQDQGERUDWHVDQGVRGLXPVXOSKDWHIURP chloride and lithium hydroxide prices showed a the region. continued move upwards with an average increase of 10% in 2004 and 14% in 2005. Financial Position Iron Ore Project – Chile The net assets of the economic entity have increased E\IURP-XQHWR-XQH The production from the nine mines situated at The increase has largely resulted from the following Vallenar is expected to be at least one million tonnes factors: RILURQRUHSHUDQQXP7KHÀUVWVKLSPHQWRILURQRUH • Share issues during the year raising will be sold by Cometals Inc in the fourth quarter of 2005 and shipped in early 2006. The iron ore mines RZQHG E\ RXU MRLQW YHQWXUH FRPSDQ\ 6RFLHGDG • Exercising of ordinary options to fully paid &RQWUDFWXDO0LQHUD6DQWD%DUEDUDFRQWDLQDOOXYLDO VKDUHVUDLVLQJ and hard rock (kiruna type) deposits and stockpiled LURQRUHÀQHV Admiralty Resources NL 2005 Annual Report 7 'XULQJ WKH SDVW ÀQDQFLDO\HDUWKH &RPSDQ\ KDV 7KHUH DUH D QXPEHU RI QDWLRQDO DQG LQWHUQDWLRQDO LQYHVWHG LQ VLJQLÀFDQW PLQLQJ WHQHPHQWV LQ &KLOH PLQLQJ FRPSDQLHV ZKR RSHUDWH WKHLU EXVLQHVVHV DQG ZLOO FRQWLQXH WR GHGLFDWH UHVRXUFHV WR VHFXUH DQG H[WUDFW UHVRXUFHV ZLWKLQ WKH YLFLQLW\ RI RXU LWV ORQJWHUP VXFFHVV :H DQWLFLSDWH JHQHUDWLQJ PLQHV7KHVHDUHDVIROORZV UHYHQXHIURPWKHVDOHRILURQRUHLQHDUO\ Lithium Chloride (Brine operations) 6LJQLÀFDQW &KDQJHV LQ 6WDWH RI • )0&&RUSRUDWLRQ $IIDLUV +RPEUH0HXUWRLVORFDWHGNLORPHWUHVVRXWK RIWKH5LQFRQ6DODU 7KH IROORZLQJ VLJQLÀFDQW FKDQJHV LQ WKH VWDWH RI DIIDLUV RI WKH SDUHQW HQWLW\ RFFXUUHG GXULQJ WKH • 6RFLHGDG4XLPLFD\0LQHUDGH&KLOH6$ 640 ÀQDQFLDO\HDU &KLOH • 2Q -DQXDU\ WKH &RPSDQ\ LVVXHG /RFDWHGNLORPHWUHV VRXWK RI WKH 5LQFRQ XQOLVWHGRSWLRQVH[HUFLVDEOHDW 6DODU640SURGXFHVWRQQHVRIOLWKLXP FHQWVHDFKRQRUEHIRUH1RYHPEHU FDUERQDWHSHUDQQXP • 2Q )HEUXDU\ WKH &RPSDQ\ LVVXHG • 5RFNZRRG6SHFLDOLWLHV*URXS&KHPHWDOO)RRWH FRQYHUWLQJQRWHVZLWKDQLVVXHSULFH &RUSRUDWLRQ RI HDFK WR UDLVH :H DGYLVHG RQ )HEUXDU\ WKDW VHWWOHPHQW /RFDWHGDW/D1HJUD&KLOHDQGLQWKH$WDFDPD KDG WDNHQ SODFH IRU WKH ÀUVW LQVWDOPHQW RI UHJLRQRI&KLOH3URGXFHVOLWKLXPFDUERQDWH Iron ore • 2Q 0DUFK WKH &RPSDQ\ LVVXHG • &RPSDQLD0LQHUD3DFLÀFD &03 RUGLQDU\VKDUHVDWFHQWVHDFK DVSDUWFRQVLGHUDWLRQIRUWKHDFTXLVLWLRQRI El Romeral RI6RFLHGDG&RQWUDFWXDO0LQHUD6DQWD%DUEDUD 7KLVPLQHLVORFDWHGNLORPHWUHVVRXWK LQ&KLOHLQDFFRUGDQFHZLWKWKHDQQRXQFHPHQW RIWKH6RFLHGDG&RQWUDFWXDO0LQHUD6DQWD PDGHRQ)HEUXDU\ %DUEDUDPLQHV'XULQJPLOOLRQ • 2Q -XQH RSWLRQV ZHUH WRQQHVRIPDWHULDOZDVSURFHVVHGWRSURGXFH H[HUFLVHGUDLVLQJIRUWKHFRPSDQ\ PLOOLRQWRQQHVRIOXPSVDQGÀQHVDQG PLOOLRQWRQQHVRISHOOHWIHHGVWRFN,WV %XVLQHVVVWUDWHJLHV UHVHUYHVDUH PLOOLRQWRQQHV Los Colorados $V DFRPSDQ\ZHSODQWRFRQWLQXH WR GHYHORS WKH YDOXDEOH UHVRXUFHV RZQHG E\ WKH JURXS :H /RFDWHG NLORPHWUHV QRUWK RI WKH 6RFLHGDG DQWLFLSDWH RXU ÀUVW VKLSPHQW RI LURQ RUH ZLOO EH &RQWUDFWXDO0LQHUD6DQWD%DUEDUDPLQHV7KLV FRPSOHWHGLQWKHÀUVWTXDUWHURIZLWKDQQXDO LVWKHODUJHVWPLQHLQ&KLOHH[WUDFWLQJRYHU VDOHV RI DW OHDVW RQH PLOOLRQ WRQQHV JHQHUDWLQJ PLOOLRQWRQQHVD\HDU UHYHQXHVRI860SHUDQQXP El Algarrobo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ÀQHVDQGWRQQHV PLQHUDOV 3URGXFWLRQ FDQFRPPHQFH ZLWKLQ WKUHH RIOXPS PRQWKV WR WZR \HDUV ZLWK PLQH OLYHV LQ H[FHVV RI \HDUVDQGIRUOLWKLXPFKORULGHRXUPRVWYDOXDEOH PLQHUDOPRUHWKDQ\HDUV 8 Admiralty Resources NL 2005 Annual Report Potassium chloride (Potash) An estimate of one of the main tenements in Chile being the Japonesa mine has been made by Metalica • PCS Yumbes &RQVXOWRUHV RXU JHRORJLFDO FRQVXOWDQWV XVLQJ WKH Located in the Atacama region of northern standard and internationally accepted techniques Chile. and procedures. Sodium sulphate The estimate of the Japonesa tenement is in their • 640LVWKHPDLQSURGXFHURIVRGLXPVXOSKDWHLQ YLHZ FRPSDWLEOH ZLWK WKH -25& FRGH VWDQGDUGV &KLOH SURGXFLQJ DSSUR[LPDWHO\ WRQQHV Metalica’s view is that the total resources of the per annum Japonesa tenements amounts to 31 million tonnes of iron ore with a 15.5% average grade. 42% of this • Pagrum S.A. Guatrache is a producer of sodium amount is the total of the measured plus indicated sulphate in Argentina producing approximately class and 58% in the inferred class. WRQQHVSHUDQQXP • La Brava After balance date events 2Q 6HSWHPEHU WKH GLUHFWRUV RI WKH Located in the Jujuy province approximately 70 Company entered into a loan facility with Perolin kilometres from Susques. Investments Pty Limited for up to $6 million. The Boric acid original facility of $2 million was drawn down to DQG VXEVHTXHQWO\ UHSDLG LQ $SULO • Borax Argentina SA The facility is available when required and this has Located 30 kilometres south of the Rincon EHHQ FRQÀUPHG LQ ZULWLQJ DQG ORDQ DJUHHPHQWV 6DODU DW &DPSR 4XLMDQR 7KH\ DUH WKH PDMRU have been exchanged. This facility will be used by producers of boric acid producing approximately the Company for working capital and will be applied WRQQHVRIERUDWHRUHVSHUDQQXPDQG to further the Rincon Salar Project in Argentina and WRQQHVRIERULFDFLG7KH\DUHD the iron ore project in Chile. subsidiary of Rio Tinto Ltd. 2WKHU WKDQ WKHDERYHPDWWHUWKHUHKDVQRWEHHQ • Minera Santa Rita SRL DQ\PDWWHURUFLUFXPVWDQFHRWKHUWKDQWKDWUHIHUUHG WRLQWKHÀQDQFLDOVWDWHPHQWVRUQRWHVWKHUHWRWKDW &DPSR4XLMDQRLVORFDWHGNLORPHWUHVVRXWKRI KDVDULVHQVLQFHWKHHQGRIWKHÀQDQFLDO\HDUWKDW 6XVTXHVDQGSURGXFHVDSSUR[LPDWHO\ KDVVLJQLÀFDQWO\DIIHFWHGRUPD\VLJQLÀFDQWO\DIIHFW WRQQHVSHUDQQXP&XUUHQWO\WKH\DUH WKHRSHUDWLRQVRIWKHFRQVROLGDWHGHQWLW\WKHUHVXOWV targeting the pharmaceutical industry. RI WKRVH RSHUDWLRQV RU WKH VWDWH RI DIIDLUV RI WKH FRQVROLGDWHGHQWLW\LQIXWXUHÀQDQFLDO\HDUV • Compania Minera Gavenda is located at 2ODFDSDWRNLORPHWUHVIURP6XVTXHV Options • Manufactura Los Andes RSWLRQV ZHUH LVVXHG GXULQJ WKH Located in Salar de Cauchari and produces ÀQDQFLDO\HDUHQGHG-XQHH[HUFLVDEOHDW DSSUR[LPDWHO\WRQQHVSHUDQQXP cents each and will expire on 30 November 2007. 7KH &RPSDQ\ KDV D ODUJH UHVRXUFH EDQN ZKLFK LW 7KHUH DUH XQLVVXHG RUGLQDU\ VKDUHV intends to develop and commercially exploit going for which options are outstanding as at the date of forward. this report. These options are held by MTM Holdings $XVWUDOLD 3W\ /LPLWHG PLOOLRQ DQG Based on the JORC compliant estimate the /HYHUDJH&DSLWDO3W\/LPLWHG Company’s lithium (and other evaporates) deposit in the Rincon Salar has a life expectancy exceeding No unlisted options were granted to directors during \HDUV DVVXPLQJ DQ H[WUDFWLRQ UDWH RI the year. tonnes of lithium chloride per annum. Admiralty Resources NL 2005 Annual Report 9 Meetings of Directors Director and executive details 'XULQJWKHÀQDQFLDO\HDUGLUHFWRUVPHHWLQJVZHUH The directors of Admiralty Resources NL during the held. Attendances at the meetings were as follows: year were: • Professor J. Ross Harper No. eligible No. attended to attend • Phillip Thomas )(GJH 22 • Anthony Dickson P Thomas 10 10 • Shane Mulcahy S Mulcahy 8 5 A Dickson 9 9 • )DQN(GJH R J Harper 2 2 The group executives of Admiralty Resources NL during the year were: There are two formally constituted committees of the board of directors as at the date of this report being • Phillip Thomas the Remuneration Review Committee and the Audit Committee. The details of these committees have Principles used to determine the nature been outlined further in the Corporate Governance and amount of remuneration Statement disclosure on page 15 of the Annual The objective of the Company’s executive reward Report. framework is to ensure reward for performance is competitive and appropriate for the results Directors’ share and option holdings delivered. The directors disclose their interest in shares and Non-executive directors RSWLRQVDVDWWKHGDWHRIWKLVUHSRUW )HHV DQG SD\PHQWV WR QRQH[HFXWLYH GLUHFWRUV 6KDUHVDQGRSWLRQVKHOGEHQHÀFLDOO\RUZKHUHWKHUH UHÁHFW WKH GHPDQGV ZKLFK DUH PDGH RQ DQG WKH is a relevant interest: UHVSRQVLELOLWLHVRIWKHGLUHFWRUV7KH%RDUGUHYLHZV the fees annually. No. of No. of Shares Options Non-executive director’s fees are determined within Prof. J R Harper Nil Nil DQDJJUHJDWHG L U H F W R U ·V S R R O O L P L W ZKLFKLVSHULRGLFDOO\ recommended for approval by shareholders. The P Thomas Nil PD[LPXPSRROFXUUHQWO\VWDQGVDW A Dickson Nil Nil Retirement allowances for directors Remuneration report There are currently no retirement allowances for Remuneration policy for directors and directors. executives ([HFXWLYHSD\ The matters of remuneration for directors are dealt )HHVDQGSD\PHQWVWRH[HFXWLYHVUHÁHFWWKHGHPDQGV with by the Board of Directors and are determined ZKLFKDUHPDGHRQDQGWKHUHVSRQVLELOLWLHVRIWKH according to merit and normal industry levels. executive. Remuneration levels are not directly linked to the performance of the Company and the consolidated entity. 10 Admiralty Resources NL 2005 Annual Report Short-term incentives Elements of remuneration related to performance There are no short-term incentives plans in place. There are no elements of remuneration related to Remuneration packages contain the following key performance. elements: • Directors fees • Consulting fees The following table discloses the remuneration of the directors of the company: Primary Post employment Equity 2005 UEHQHÀWV Salary fees & Bonus Non-monetary Superannuation Prescribed EHQHÀWV Other Options 2WKH Total $ $$$$$$$ $ Fank Edge 53,636 ------53,636 Phillip Thomas 427,433------427,433 Shane Mulcahy27,000 ------27,000 Anthony Dickson36,000 ------36,000 J.Ross Harper 18,239------18,239 Primary Post employment Equity 2004 UEHQHÀWV Salary fees & Bonus Non-monetary Superannuation Prescribed EHQHÀWV Other Options 2WKH Total $ $$$$$$$ $ Fank Edge 185,455------185,455 Phillip Thomas ------ Shane Mulcahy ------ Admiralty Resources NL 2005 Annual Report 11 7KHIROORZLQJWDEOHGLVFORVHVWKHUHPXQHUDWLRQRIWKHÀYHKLJKHVWUHPXQHUDWHGH[HFXWLYHVRIWKHFRPSDQ\DQGJURXS executives of the consolidated entity: Primary Post employment Equity 2005 UEHQHÀWV Salary fees & Bonus Non-monetary Superannuation Prescribed EHQHÀWV Other Options 2WKH Total $$$$$$$$ $ Phillip Thomas ------ Primary Post employment Equity 2004 UEHQHÀWV Salary fees & Bonus Non-monetary Superannuation Prescribed EHQHÀWV Other Options 2WKH Total $$$$$$$$ $ )DQN(GJH ------ Value of options issued to directors and executives 7KHIROORZLQJWDEOHGLVFORVHVWKHYDOXHRIRSWLRQVJUDQWHGH[HUFLVHGRUODSVHGGXULQJWKH\HDU Options Options Options Granted ([HUFLVHG Lapsed nsists of of nsists options d and lue of of lue Value at $ date grant Value at exercise $ date $ Total va options granted, exercise $ lapsed Value of included in remuneration the for year $ Percentage of total remuneration the for year that co options % )DQN(GJH 000000 12 Admiralty Resources NL 2005 Annual Report Value of options - basis of calculation Auditor’s Independence Declaration 7KH RSWLRQV JUDQWHG WR 0U )DQN (GJH The auditor’s independence declaration is included ODSVHGZLWKRXWEHLQJH[HUFLVHGGXULQJWKHÀQDQFLDO on page 14. year. Signed in accordance with a resolution of the Board Environment of Directors made pursuant to s.298 (2) of the Corporations Act 2001. The consolidated entity aims to ensure that the highest standard of environmental care is achieved. On behalf of the Directors The Board maintains the responsibility to ensure that the consolidated entity’s environment policies are adhered to and to ensure that the consolidated entity is aware of and is compliant with all relevant environmental legislation. There have been no HQYLURQPHQWDO EUHDFKHV GXULQJ WKH ÀQDQFLDO year. Non –audit services P Thomas 'XULQJ WKH \HDU WKHUH ZHUH QR QRQDXGLW VHUYLFHV Director SURYLGHGE\'HORLWWH7RXFKH7RKPDWVXWKH&RPSDQ\·V auditors. 'DWHGDW6\GQH\WKLV WKGD\RI6HSWHPEHU ,QGHPQLÀFDWLRQRI2IÀFHUVDQG Auditors 'XULQJ RU VLQFH WKH ÀQDQFLDO \HDU WKH &RPSDQ\ KDVQRWLQGHPQLÀHGRUPDGHDUHOHYDQWDJUHHPHQW WR LQGHPQLI\ DQ RIÀFHU RU DXGLWRU RI WKH FRPSDQ\ or of any related body corporate against a liability LQFXUUHGDVVXFKDQRIÀFHURUDXGLWRU,QDGGLWLRQ WKH FRPSDQ\ KDV QRW SDLG RU DJUHHG WR SD\ D premium in respect of a contract insuring against a OLDELOLW\LQFXUUHGE\DQRIÀFHURUDXGLWRU Admiralty Resources NL 2005 Annual Report 13 Auditor’s Independence Declaration 14 Admiralty Resources NL 2005 Annual Report Corporate Governance Statement The Company’s core business strategy is mining high value evaporates and iron ore. Core Business Summary tenements are also located near Vallenar in Chile. The joint venture will operate the nine original iron The Company’s core business strategy is mining high ore mines which contain alluvial and hard rock value evaporates that have strong demand in many (kiruna type vein) deposits and stockpiled iron ore LQGXVWULHV/LWKLXPFKORULGHSRWDVVLXPFKORULGHDQG ÀQHV other lithium compounds are the key products to be extracted from our salt lake brines. Corporate Governance The Company’s salar is known as the Salar del The Directors are committed and support the Rincon and is a major multi-elemental brine implementation of best practice in corporate UHVRXUFHORFDWHGLQWKH6DOWD3URYLQFHRI$UJHQWLQD JRYHUQDQFHDSSOLHGLQDPDQQHUWKDWLVDSSURSULDWH and in the vicinity of two of the largest producers of to the Company’s circumstances. lithium compounds and potash in the world. The Company will use the sales proceeds from its The Company will continue to develop the mineral participation in the Santa Barbara joint venture to evaporate resources of the Rincon and nearby salars fund construction of its lithium production facility and (salt lakes) in Argentina. develop the evaporates business. The Company’s 7KH 5LQFRQ 6DODU WHQHPHQWV FRYHULQJ DQ DUHD LQ corporate governance practices and procedures H[FHVVRIVTXDUHNLORPHWUHVZHUHDFTXLUHGLQ are directed to providing an appropriate framework )HEUXDU\7ZHQW\IRXUVTXDUHNLORPHWUHVKDYH IRUWKHSXUVXLWRIWKLVREMHFWLYHZKLOHSURWHFWLQJWKH been drilled and tested. rights and interests of shareholders and ensuring that the Company conducts its business lawfully The Company is also actively developing its nine and ethically. iron ore mines in the Sociedad Contractual Minera Santa Barbara joint venture which will commence On 31 March 2003 the Corporate Governance SURGXFWLRQGXULQJ7KHÀUVWVKLSPHQWRILURQ Council of the Australian Stock Exchange released ore is expected to be sold by Cometals in the fourth its “Principles of Good Corporate Governance and TXDUWHURIDQGEHVKLSSHGLQWKHÀUVWTXDUWHU Best Practice Recommendations” (“ASX Principles of 2006. and Recommendations”). The joint venture has recently won a tender and has acquired several new tenements. These new Admiralty Resources NL 2005 Annual Report 15 The board of directors has reviewed the Company’s • Establishment and monitoring of risk corporate governance practices and procedures DVVHVVPHQW DQG PDQDJHPHQW LQWHUQDO and has put in place a revised framework of compliance and control procedures; LQWHUQDOSROLFLHVSURFHGXUHVDQGJXLGHOLQHVIRUWKH • Review and approval of the Company’s yearly JRYHUQDQFH RI WKH &RPSDQ\ ZKLFK KDV appropriate regard to the ASX Principles and DQG KDOI \HDUO\ ÀQDQFLDO UHSRUWV DQG RWKHU Recommendations. ÀQDQFLDO UHSRUWLQJ LQ FRPSOLDQFH ZLWK WKH DSSOLFDEOH DFFRXQWLQJ VWDQGDUGV WKH /LVWLQJ The governance framework will continue to be 5XOHVRIWKH$XVWUDOLDQ6WRFN([FKDQJHDQGWKH reviewed by the Board with the object of achieving Corporations Act; at all times the highest standards of corporate • governance and ethical corporate behaviour. $SSRLQWPHQW UHPRYDO DQG UHPXQHUDWLRQ RI DQG GHOHJDWLRQ RI DXWKRULW\ WR WKH 0DQDJLQJ Director; Roles of the Board and • $SSRLQWPHQW UHPRYDO DQG PRQLWRULQJ RI Management the performance of the Secretary and the The Board is accountable to shareholders and Company’s external accountants; regulators for the activities and performance of • $SSRLQWPHQWRIOLDLVRQZLWKDQGUHJXODUUHYLHZ the Company and has overall responsibility for the RIWKHHIIHFWLYHQHVVDQGLQGHSHQGHQFHRIWKH Company’s core business together with its corporate Company’s external auditor; governance. • 5HJXODUO\ UHFHLYLQJ UHYLHZLQJ DQG DSSO\LQJ +RZHYHU WKH %RDUGSURYLGHV JXLGDQFH WR WKH reports and recommendations from the management team that manages the business and 0DQDJLQJ 'LUHFWRU FRQFHUQLQJ VLJQLÀFDQW affairs of the Company. aspects of the Company’s business and Responsibility for management of the Company’s operations; EXVLQHVV DQG DIIDLUV ZLWKLQ WKH VFRSH RI WKH • $SSURYLQJ DQG PRQLWRULQJ ÀQDQFLDO DQG RWKHU JRYHUQDQFHIUDPHZRUNHVWDEOLVKHGE\WKH%RDUGLV reporting; GHOHJDWHGWRWKH0DQDJLQJ'LUHFWRUDQGVXEMHFWWR the oversight and supervision of the Board. It is the • Informing itself about and considering the UHVSRQVLELOLW\RIWKH0DQDJLQJ'LUHFWRUDFWLQJZLWKLQ implications of events and circumstances that KLV GHOHJDWHG DXWKRULW\ WR PDQDJH WKH &RPSDQ\ FRXOGVLJQLÀFDQWO\DIIHFWWKH&RPSDQ\ and its business. • Ensuring that appropriate policies and The corporate governance framework includes procedures are in place for sound corporate guidelines covering Board membership and governance including compliance with operation that formalise the functions and continuous disclosure requirements and other UHVSRQVLELOLWLHV RI WKH %RDUG LQFOXGLQJ WKH QDWXUH legal compliance; RIPDWWHUVUHVHUYHGWRWKH%RDUGDQGDOVRFRQWDLQ guidelines for the operation and management of the • To set the strategic direction of the Company Board. and monitor progress of those strategies; • Take responsibility for Corporate Governance; Responsibilities of the Board • 5HYLHZDQGUDWLI\V\VWHPVIRUKHDOWKVDIHW\DQG The Board’s responsibilities include: environmental management; risk and internal control and regulatory compliance for both • 2YHUVLJKWRIWKH&RPSDQ\LQFOXGLQJLWVFRQWURO employees and contractors. and accountability systems and the performance of the Managing Director; • 5HYLHZ DQG UDWLÀFDWLRQ RI WKH LQWHJULW\ RI WKH &RPSDQ\·VÀQDQFLDOPDQDJHPHQWDQGUHSRUWLQJ systems and processes; 16 Admiralty Resources NL 2005 Annual Report Appointment and Rotation of materially interfere with) the exercise of unfettered and independent judgment. Directors ,QGHWHUPLQLQJZKHWKHUWKLVFULWHULRQLVVDWLVÀHGWKH Each director is appointed for a term of three years Board has regard to threshold tests to assess whether and then may retire or nominate for re-election. there are matters that may require consideration in Phillip Thomas was elected a director in November relation to a Director’s ability to exercise unfettered 2003 and thus will be up for re-election at the and independent judgment. 2006 annual general meeting. Anthony Dickson was elected in 2004 and will be up for election in +RZHYHUWKHWKUHVKROGWHVWVDUHQRWFRQFOXVLYH7KH 7KH&KDLUPDQ3URIHVVRU-5RVV+DUSHUZLOO %RDUGPD\GHWHUPLQHWKDWD'LUHFWRULVLQGHSHQGHQW QRPLQDWHIRUKLVHOHFWLRQWREHUDWLÀHGDWWKH notwithstanding that some of the threshold tests are DQQXDOJHQHUDOPHHWLQJDQGLIUDWLÀHGZLOOEHXSIRU QRWPHW&RQYHUVHO\WKHUHPD\EHFLUFXPVWDQFHVLQ re-election in 2008. The Chairman of the Board ZKLFKD'LUHFWRUZLOOQRWEHFRQVLGHUHGLQGHSHQGHQW is responsible for the performance appraisal of although all the threshold tests are met. directors and this occurs annually. Criteria such ,Q FRQVLGHULQJ LQGHSHQGHQFH WKH %RDUG DV DWWHQGDQFH NQRZOHGJH DQG IDPLOLDULW\ RI NH\ distinguishes between a relationship that may issues and strategy input are some of the criteria. RFFDVLRQDOO\JLYHULVHWRDSDUWLFXODUGLVFUHWHFRQÁLFW Each director has signed a directors agreement of interest that can be addressed by appropriate VHWWLQJRXWWKHLUUHVSRQVLELOLWLHVREMHFWLYHVDQGWKH FRQÁLFW RI LQWHUHVW SURFHGXUHV DQG D UHODWLRQVKLS outcomes expected. that may more generally impair the Director’s objectivity and independence of mind. Board Structure and Composition Each Director is required to keep the Board fully 7KHVNLOOVH[SHULHQFHDQGH[SHUWLVHUHOHYDQWWRWKH informed of new developments or circumstances that SRVLWLRQRIHDFKGLUHFWRUZKRLVLQRIÀFHDWWKHGDWH may be relevant to the Director’s independence. RI WKH DQQXDO UHSRUW DQG WKHLU WHUP RI RIÀFH DUH detailed in the directors’ report. To add value to the The threshold tests to which the Board has regard &RPSDQ\WKH%RDUGKDVEHHQIRUPHGWRDGHTXDWHO\ in connection with assessing the independence of discharge its responsibilities and duties given the Directors are those set out in items 1 to 7 in Box 2.1 Company’s size and scale of operations. of the ASX Principles and Recommendations. The names of the independent directors of the ,Q WKLV FRQQHFWLRQ IRU WKH SXUSRVH RI FRQVLGHULQJ Company are: whether a relationship with a professional advisor RU FRQVXOWDQW LV PDWHULDOWKH%RDUGKDVUHJDUGWR • Professor J Ross Harper (Chairman) whether the aggregate payments for services to the advisor or consultant in any of the last three years • Anthony J Dickson (Non-executive Director) has represented more than: Independent Directors and • 5% of the advisor’s or consultant’s revenue in Chairman any of those years; or • 0.5% of the average market value of the The Board does have a majority of independent Company’s investment portfolio during any of directors. those years. Assessing the Independence of +RZHYHUWKHVHTXDQWLWDWLYHLQGLFDWRUVRISRWHQWLDO materiality will not be treated as conclusive. Directors 4XDOLWDWLYH DVSHFWV ZLOO DOVR EH FRQVLGHUHG The Board’s criterion for determining the LQFOXGLQJ WKH VWUDWHJLF VLJQLÀFDQFH DQG XQGHUO\LQJ nature of the relationship with the relevant advisor independence of a Director is whether the Director or consultant. is independent of management and free from any business or other relationship that could materially interfere with (or could reasonably be perceived to Admiralty Resources NL 2005 Annual Report 17 7KH%RDUGFRQVLGHUVWKDWRIDWRWDORIWKUHH'LUHFWRUV Audit Committee two are considered to be independent (Mr Anthony Dickson and Professor J Ross Harper). The members of the Audit Committee at the date RI WKLV UHSRUW DUH 0U 3KLOOLS 7KRPDV 0U $QWKRQ\ 0U 3KLOOLS 7KRPDV LV 0DQDJLQJ 'LUHFWRU &KLHI Dickson and Mr Victor Manauzzi. Mr Prior is Company ([HFXWLYH2IÀFHU DQG DQ ([HFXWLYH 'LUHFWRU RI WKH 6HFUHWDU\DQG0U9LFWRU0DQDX]]LLV&KLHI)LQDQFLDO Company and is not considered to be independent. 2IÀFHU Board Committees 7KH $XGLW &RPPLWWHH·V UROH DQG UHVSRQVLELOLWLHV XQGHULWVFKDUWHULQFOXGH The Board has established the following two • Oversight of the reliability and integrity of the committees to assist in carrying out the Board’s &RPSDQ\·V DFFRXQWLQJ SROLFLHV DQG ÀQDQFLDO responsibilities: reporting and disclosure practices; • Remuneration Review Committee • $GYLVLQJWKH%RDUGRQWKH&RPSDQ\·VÀQDQFLDO • Audit Committee UHSRUWLQJ GXH GLOLJHQFH ÀQDQFLDO V\VWHPV integrity and business risks; Each of these Committees has a formal charter setting out the Committee’s role and • Reviewing and monitoring the Company’s UHVSRQVLELOLWLHV FRPSRVLWLRQ VWUXFWXUH DQG external audit and risk management membership requirements. procedures; The committees operate principally in a review or • Monitoring and reviewing the effectiveness advisory capacity except where powers are expressly of the Company’s internal compliance and conferred on or delegated to a committee by the control; Board. • 5HYLHZLQJ WKH H[WHUQDO DXGLWRU·V TXDOLÀFDWLRQV Due to the relatively small size of the Company and and independence; WKH QDWXUH RI WKH &RPSDQ\·V FRUH EXVLQHVV WKH • Reviewing the performance of the external Board has not created a nominations committee. auditor; The Board itself retains and exercises responsibility • Assessment of whether the Company’s external for the selection and appointment of new Directors. reporting is consistent with committee members’ The Remuneration Review Committee’s functions information and knowledge and is adequate for include reviewing and making recommendations shareholder needs; and to the Board on matters concerning executive • (QVXULQJ SURSHU SURFHGXUHV IRU WKH VHOHFWLRQ UHPXQHUDWLRQDERXWWKHUHFUXLWPHQWUHWHQWLRQDQG appointment or removal of the external auditor termination procedures and policies for executive and rotation of the external audit engagement RIÀFHUV DQG RQ WKH UHPXQHUDWLRQ IUDPHZRUN IRU partner. Directors. 18 Admiralty Resources NL 2005 Annual Report The Audit Committee meets as often as required to Share Ownership Policy carry out its role and responsibilities. It is expected that ordinarily this will be at least four times per The Board has adopted a Directors’ Share Ownership year. Policy that sets out the principles to be observed by WKH &RPSDQ\·V 'LUHFWRUV DQG 2IÀFHUV LQ UHODWLRQ Review Committee WR EX\LQJVHOOLQJDQGGHDOLQJLQWKH&RPSDQ\·V shares. The members of the Review Committee at the 'LUHFWRUVDQG2IÀFHUVDUHUHVWULFWHGWRGHDOLQJLQWKH date of this report are Professor J Ross Harper and Company’s shares within 45 days of the release to Anthony J Dickson. the ASX of the six monthly and annual results. 8QGHULWVFKDUWHUWKH5HYLHZ&RPPLWWHH·VUROHDQG responsibilities are: Integrity of Financial Reporting • to receive and review monthly management The Company has put in place a structure of review accounts that are prepared between Board and authorisation designed to ensure factual meetings; SUHVHQWDWLRQRIWKH&RPSDQ\·VÀQDQFLDOSRVLWLRQ • to discuss with management and provide The structure includes: guidance to management on issues arising between Board meetings; • the role and responsibilities that the Audit Committee is charged with undertaking and • WRUHYLHZH[HFXWLYHUHPXQHUDWLRQUHFUXLWPHQW performing in accordance with the Audit retention and termination procedures and Committee Charter; SURWHFWLRQ IRU H[HFXWLYH RIÀFHUV DQG WKH remuneration framework for Directors; • referral to the full Board for approval of the &RPSDQ\·V \HDUO\ DQG KDOI \HDUO\ ÀQDQFLDO • to consider all other issues referred to the UHSRUWVDQGRWKHUÀQDQFLDOUHSRUWLQJ DQG Committee by the Board; • H[WHUQDODXGLWRIWKH&RPSDQ\·V\HDUO\ÀQDQFLDO • to make recommendations to the Board on UHSRUWVH[WHUQDODXGLWUHYLHZRIWKH&RPSDQ\·V matters which are the subject of the Committee’s KDOI \HDUO\ ÀQDQFLDO UHSRUWV DQG GLUHFW %RDUG deliberations. and Audit Committee access to the external The Review Committee meets as often as required to DXGLWRU ZKHQHYHU UHTXLUHG LQFOXGLQJ LQ WKH carry out its role and responsibilities. It is expected absence of management). that ordinarily this will be at least twice per year. The Audit Committee’s role and responsibilities under its charter cover processes to ensure the Corporate Code of Conduct independence and competence of the Company’s external auditor including: The Board has adopted a Corporate Code of Conduct to establish and encourage observance by • HYDOXDWLRQ RI WKH TXDOLÀFDWLRQV SHUIRUPDQFH WKH&RPSDQ\·V'LUHFWRUVDQG2IÀFHUVRIVWDQGDUGV and independence of the lead audit partner and of ethical and responsible decision making and review partner; EHKDYLRXUWKDWLVQHFHVVDU\WRPDLQWDLQFRQÀGHQFH • RYHUVHHLQJÀYH\HDUO\URWDWLRQRIWKHOHDGDXGLW in the Company’s integrity. This enables Directors partner and review partner; and to recognise and guide compliance with legal and other obligations to the Company’s shareholders • deciding whether to retain or recommend and legitimate stakeholders. termination of the appointment of the external DXGLWRU LQFOXGLQJ FRQVLGHULQJ ZKHWKHU WKHUH VKRXOG EH URWDWLRQ RI WKH H[WHUQDO DXGLW ÀUP itself. Admiralty Resources NL 2005 Annual Report 19 7KH 0DQDJLQJ 'LUHFWRU &KLHI ([HFXWLYH 2IÀFHU The potential exposures associated with operating DQGWKH6HFUHWDU\LQKLVFDSDFLW\DVERWK&RPSDQ\ the Company is managed by the Chief Executive Secretary and a principal of the Company’s external 2IÀFHUWKH&RPSDQ\VHFUHWDU\DQG&RQVXOWDQWVZKR accountants are required to state in writing to the KDYHVLJQLÀFDQWEURDGUDQJLQJLQGXVWU\H[SHULHQFH %RDUGWKDWWKH&RPSDQ\·VÀQDQFLDOUHSRUWVSUHVHQW who work together as a team and regularly share D WUXH DQG IDLU YLHZ LQ DOO PDWHULDO UHVSHFWV RI information on current activities. WKH &RPSDQ\·V ÀQDQFLDO FRQGLWLRQ DQG RSHUDWLRQDO results and are in accordance with relevant $GGLWLRQDOO\LWLVWKHUHVSRQVLELOLW\RIWKH%RDUGWR assess the adequacy of the Company’s internal accounting standards. FRQWURO V\VWHPV DQG WKDW LWV ÀQDQFLDO DIIDLUV FRPSO\ ZLWK WKH DSSOLFDEOH ODZV UHJXODWLRQV DQG Disclosure Policy professional practice. A Director and the Company The Board has put in place mechanisms designed Secretary declare in writing to the Board that the to ensure compliance with the ASX Listing ÀQDQFLDOUHSRUWLQJULVNPDQDJHPHQWDQGDVVRFLDWHG Rules Disclosure Requirements and to ensure compliance controls have been assessed and accountability at senior management level for IRXQG WR EH RSHUDWLQJ HIÀFLHQWO\ DQG HIIHFWLYHO\ that compliance. The disclosure policy includes A Director and Company Secretary prior to the Director’s approval of the release of the annual and SURFHVVHVIRUWKHLGHQWLÀFDWLRQRIPDWWHUVWKDWPD\ have a material effect on the price of the Company’s six monthly accounts make this representation. securities and notifying them to the ASX. 7KLV UHSUHVHQWDWLRQ LV PDGH DIWHU HQTXLU\ RI DQG UHSUHVHQWDWLRQ E\ DSSURSULDWH OHYHOV RI Communications Strategy management. The Company also has a strategy to promote Performance Review effective communication with shareholders and encourage effective participation through a policy An annual performance evaluation of the board and all board members is conducted at the end of the RI RSHQ GLVFORVXUH WR VKDUHKROGHUV UHJXODWRU\ authorities and the broader community of all material ÀQDQFLDO\HDU0HPEHUVRIWKH%RDUGDUHUHTXHVWHG information with respect to the Company’s affairs. to provide feedback as to how they feel they have performed over the 12 month period (360 degree feedback). The Chairman also spoke to each Director Attendance of External Auditor at individually regarding their role as a Director of Annual General Meetings the Company. The Board has agreed to engage an LQGHSHQGHQWFRQVXOWDQWLQWKHHQVXLQJÀQDQFLDO\HDU It is the practice of the Company to require the to develop a questionnaire for all Board members and external auditor to attend the annual general members of senior management. This questionnaire meeting and be available to answer shareholders would be designed to provide feedback on how they questions about the conduct of the annual audit and thought the Board had performed. The results of the content of the auditors report. questionnaire can then be collated and developed into a series of recommendations to enhance 5LVN,GHQWLÀFDWLRQDQG performance. Management Secretary The risks involved in an exploration and mining All Directors have access to the Secretary of the &RPSDQ\ DQG WKH VSHFLÀF XQFHUWDLQWLHV IRU WKH Company. &RPSDQ\ FRQWLQXH WR EH UHJXODUO\ PRQLWRUHG DQG reviewed by the Board. All proposals reviewed by 7KH6HFUHWDU\LVDFFRXQWDEOHWRWKH%RDUGWKURXJK the Board include a conscious consideration of the WKH&KDLUPDQRQDOOFRUSRUDWHJRYHUQDQFHPDWWHUV issues and risks of the proposal. 20 Admiralty Resources NL 2005 Annual Report Independent Professional Advice Directors may obtain independent professional advice at the expense of the Company subject to ÀUVW LQIRUPLQJ WKH &KDLUPDQ RI WKHLU LQWHQWLRQ WR obtain the advice. Remuneration The Board’s policy is to remunerate executive and non-executive directors at market rates. These rates are sourced from information published by various 5LQFRQ6DODU'VDWHOOLWHYLHZ UHFUXLWPHQW ÀUPV DV ZHOO DV WKRVH UDWHV XVHG WR remunerate directors of comparable companies for the time commitment and responsibilities Company’s Website LQYROYHG$QQXDOO\WKH%RDUGUHYLHZVGLUHFWRUV·IHHV The Company maintains a website at FRQVLGHULQJH[WHUQDOGDWDWKHWLPHFRPPLWPHQWRI www.ady.com.au. GLUHFWRUVWKHVL]HDQGVFDOHRI$GPLUDOW\5HVRXUFHV· RSHUDWLRQ WKH TXDQWXP RI WKH WDVNV LQ WKH LQLWLDO 7KH :HEVLWH LV XVHG WR FRPSOHPHQW WKH RIÀFLDO SKDVHV RI GHYHORSPHQW RI WKH &RPSDQ\ PDUNHW release of material information to the market. capitalisation and various other factors. $OO UHOHYDQW DQQRXQFHPHQWV PDGH WR WKH PDUNHW DQGUHODWHGLQIRUPDWLRQDUHSODFHGRQWKHZHEVLWH Annual Corporate Governance after they have been released to Australian Stock Review Exchange. $WOHDVWDQQXDOO\WKH%RDUGUHYLHZVWKH&RPSDQ\·V The website also provides information about the last corporate governance framework and processes three years press releases/announcements plus including: WKUHH\HDUVRIÀQDQFLDOGDWD • the composition of the Board and Board committees; and • the Guidelines covering Board Membership and 2SHUDWLRQ WKH FKDUWHUV RI %RDUG &RPPLWWHHV and other relevant policies. ,QGHPQLÀFDWLRQ DQG ,QVXUDQFH RI Directors The Company has entered into agreements with each of the Directors that indemnify them and require WKH &RPSDQ\ WR DUUDQJH IRU WKHP WR EH LQVXUHG in each case as permitted by the Constitution and WKH&RUSRUDWLRQV$FWLQUHVSHFWRIFHUWDLQOLDELOLWLHV WKH\ PD\ LQFXU DV 'LUHFWRUV DQG 2IÀFHUV RI WKH Company. Admiralty Resources NL 2005 Annual Report 21 Schedule of mining tenements Tenement Locality Registered Holder State Other Notes Reference 16879 Rincon ADY Resources Limited Argentina Rincon Project 16880 Rincon I ADY Resources Limited Argentina Rincon Project 16881 Rincon II ADY Resources Limited Argentina Rincon Project 16882 Rincon III ADY Resources Limited Argentina Rincon Project 16883 Rincon IV ADY Resources Limited Argentina Rincon Project 16884 Rincon V ADY Resources Limited Argentina Rincon Project 16982 Rincon VI ADY Resources Limited Argentina Rincon Project 16983 Rincon VII ADY Resources Limited Argentina Rincon Project 16984 Rincon VIII ADY Resources Limited Argentina Rincon Project 16985 Rincon IX ADY Resources Limited Argentina Rincon Project 16986 Rincon X ADY Resources Limited Argentina Rincon Project 16987 Rincon XI ADY Resources Limited Argentina Rincon Project 16988 Rincon XII ADY Resources Limited Argentina Rincon Project 16989 Rincon XIII ADY Resources Limited Argentina Rincon Project 16990 Rincon XIV ADY Resources Limited Argentina Rincon Project 16991 Rincon XV ADY Resources Limited Argentina Rincon Project 17052 Adriana II ADY Resources Limited Argentina Rincon Project 22 Admiralty Resources NL 2005 Annual Report Tenement Locality Registered Holder State Other Notes Reference 17053 Adriana III ADY Resources Limited Argentina Rincon Project 17054 Adriana IV ADY Resources Limited Argentina Rincon Project 17055 Adriana V ADY Resources Limited Argentina Rincon Project 17056 Adriana VI ADY Resources Limited Argentina Rincon Project 17057 Adriana VII ADY Resources Limited Argentina Rincon Project 17058 Adriana VIII ADY Resources Limited Argentina Rincon Project 17059 Adriana IX ADY Resources Limited Argentina Rincon Project 17083 Belen ADY Resources Limited Argentina Rincon Project 17084 Belen I ADY Resources Limited Argentina Rincon Project 17112 Belen IV ADY Resources Limited Argentina Rincon Project 17190 Paula V ADY Resources Limited Argentina Rincon Project 17170 Paula XV ADY Resources Limited Argentina Rincon Project 17004 Alvaro ADY Resources Limited Argentina Rincon Project 5449 Estela ADY Resources Limited Argentina Rincon Project 9084 Silvina ADY Resources Limited Argentina Rincon Project 4730 Inti ADY Resources LimitedArgentina Rincon Project 18018 Solicitud de ADY Resources Limited Argentina Rincon Project Servitumbre M39/159 WA 100% Greater Australian Gold NL Australia Pyke Hill MLN726 NT 100% Moonlight Mining NL Australia Bulman MLN 727 NT 100% Moonlight Mining NL Australia Bulman ELA23814 NT 100% Moonlight Mining NL Australia Bulman 1422 Japonesa Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 1416 Gibaiju Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 1417 Japonesita Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 1418 Soberana Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 73 Negrita Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 1421 Mirador Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 1052 Natasha Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 796 Tatiana Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara 631 Pamela Sociedad Contractual Minera Chile Sociedad Contractual Minera Santa Barbara Santa Barbara Admiralty Resources NL 2005 Annual Report 23 Statement of Financial Performance Financial Year ended 30 June 2005 Consolidated Company 2005 2004 2005 2004 Note $$$$ Revenues from ordinary activities 2 Other expenses from ordinary activities 3 Loss from ordinary activities before income tax expense Income tax expense relating to ordinary activities 5 ---- Loss from ordinary activities after related income tax expense Total changes in equity other than those resulting from transactions with owners as owners (DUQLQJVSHUVKDUH Basic and diluted earnings per share 9(0.65)(0.24) (cents per share) 1RWHVWRWKHÀQDQFLDOVWDWHPHQWDUHLQFOXGHGRQSDJHV 24 Admiralty Resources NL 2005 Annual Report Statement of Financial Position Financial Year ended 30 June 2005 Consolidated Company 2005 2004 2005 2004 Note $$ $$ &855(17$66(76 Cash assets Receivables 10 2WKHUÀQDQFLDODVVHWV 11 Other 14 727$/&855(17$66(76 121&855(17$66(76 Receivables 10 - 2WKHUÀQDQFLDODVVHWV 11 - 3URSHUW\SODQWDQGHTXLSPHQW 13 Other 14 727$/121&855(17$66(76 727$/$66(76 &855(17/,$%,/,7,(6 Payables 15 727$/&855(17/,$%,/,7,(6 121&855(17/,$%,/,7,(6 Interest-bearing liabilities 16 - - 727$/121&855(17/,$%,/,7,(6 - - 727$//,$%,/,7,(6 1(7$66(76 (48,7< Contributed equity 17 Accumulated Losses 18 727$/(48,7< 1RWHVWRWKHÀQDQFLDOVWDWHPHQWDUHLQFOXGHGRQSDJHV Admiralty Resources NL 2005 Annual Report 25 Statement of Cash Flows Financial Year ended 30 June 2005 Consolidated Company 2005 2004 2005 2004 Note $$$$ &$6+)/2:6)52023(5$7,1*$&7,9,7,(6 Receipts from customers - -- Payments to suppliers and employees Interest received Interest paid Net cash used in operating activities 22(b) &$6+)/2:6)520,19(67,1*$&7,9,7,(6 3D\PHQWIRUSURSHUW\SODQWDQGHTXLSPHQW - - Payment for mining tenement exploration - -- Payment on behalf of subsidiaries --- Purchase of business 22(c) --- Purchase of controlled entity - - - Amounts advanced to associate - - Amounts advanced to controllec entities - - - Proceeds from term deposit --- Net cash used in investing activities &$6+)/2:6)520),1$1&,1*$&7,9,7,(6 Proceeds from issues of equity securities Converting notes - liability portion - - Converting notes - equity portion - - Cost of issuing converting notes - - Repayment of borrowings - - 1HWFDVKSURYLGHGE\ÀQDQFLQJDFWLYLWLHV Net increase in cash held &DVKDWWKHEHJLQQLQJRIWKHÀQDQFLDO\HDU &DVKDWWKHHQGRIWKHÀQDQFLDO\HDU 22(a) 1RWHVWRWKHÀQDQFLDOVWDWHPHQWDUHLQFOXGHGRQSDJHV 26 Admiralty Resources NL 2005 Annual Report Notes to the Financial Statements Financial Year ended 30 June 2005 1RWH 6WDWHPHQW RI 6LJQLÀFDQW 7KH IROORZLQJ VLJQLÀFDQW DFFRXQWLQJ SROLFLHV KDYH Accounting Policies been adopted in the preparation and presentation RIWKHÀQDQFLDOUHSRUW Financial reporting framework (a) Going Concern 7KH ÀQDQFLDO UHSRUW LV D JHQHUDO SXUSRVH ÀQDQFLDO report which has been prepared in accordance with 7KHGLUHFWRUVKDYHSUHSDUHGWKHÀQDQFLDOVWDWHPHQWV WKH &RUSRUDWLRQV $FW $FFRXQWLQJ 6WDQGDUGV RQ D JRLQJ FRQFHUQ EDVLV ZKLFK FRQWHPSODWHV DQG 8UJHQW ,VVXHV *URXS &RQVHQVXV 9LHZV DQG continuity of normal business activities and the complies with other requirements of the law. realisation of assets and extinguishment of liabilities in the ordinary course of business. 7KHÀQDQFLDOUHSRUWFRYHUVWKHFRQVROLGDWHGHQWLW\ RI$GPLUDOW\5HVRXUFHV1/DQGFRQWUROOHGHQWLWLHV The ability of the Company and the Consolidated and Admiralty Resources NL as an individual parent Entity to continue as a going concern is dependent entity. Admiralty Resources NL is a listed public upon a number of factors one being the continuation FRPSDQ\LQFRUSRUDWHGDQGGRPLFLOHGLQ$XVWUDOLD and availability of funds under a secured loan facility of $6 million from Perolin Investments Pty Limited 7KHÀQDQFLDOUHSRUWKDVEHHQSUHSDUHGRQWKHEDVLV entered into on 21 September 2005 with the terms RIKLVWRULFDOFRVWVH[FHSWZKHUHVWDWHGDQGGRHV of the loan the facility being as follows: not take into account changing money values or current valuations of non-current assets. Cost is • )DFLOLW\ based on the fair values of the consideration given • 6HFXULW\ 5HJLVWHUHG ÀUVW PRUWJDJH in exchange for assets. overmining tenements owned by 6LJQLÀFDQWDFFRXQWLQJSROLFLHV the Company and its controlled HQWLWLHV DV ZHOO DV D À[HG DQG Accounting policies are selected and applied in a ÁRDWLQJFKDUJHRYHUWKHDVVHWVRI PDQQHUZKLFKHQVXUHVWKDWWKHUHVXOWLQJÀQDQFLDO the Company. LQIRUPDWLRQVDWLVÀHVWKHFRQFHSWVRIUHOHYDQFHDQG UHOLDELOLW\WKHUHE\HQVXULQJWKDWWKHVXEVWDQFHRIWKH • 7HUP 7ZR\HDUVUHSD\DEOHDWDQ\WLPH underlying transactions or other events is reported. or can be converted at any time into shares. Admiralty Resources NL 2005 Annual Report 27 • Repayment: Interest only for two years %DVHGXSRQWKHYLHZVRXWOLQHGDERYHWKHGLUHFWRUV EHOLHYHWKDWZKLOVWVLJQLÀFDQWXQFHUWDLQW\H[LVWVZLWK • Interest rate: NAB 90 Bank Bill Rate plus UHVSHFWWRJRLQJFRQFHUQWKHJRLQJFRQFHUQEDVLVRI 1%. Capitalised for 24 months preparation is appropriate. then payable 6 months in arrears Should the Company and Consolidated Entity be XQDEOH WR FRQWLQXH DV JRLQJ FRQFHUQV WKH\ PD\ • Draw Down: Part draw downs will be made be required to realise their assets and extinguish available 14 days from liabilities other than in the ordinary course of QRWLÀFDWLRQ EXVLQHVV DQG DW DPRXQWV WKDW GLIIHU IURP WKRVH It is anticipated the $6 million loan facility will be VWDWHGLQWKHÀQDQFLDOVWDWHPHQWV UHSDLG IURP D QXPEHU RI VRXUFHV SULPDULO\ WKH 7KHVH ÀQDQFLDO VWDWHPHQWV GR QRW LQFOXGH DQ\ Company has lent money for working capital to its adjustments relating to the recoverability and MRLQW YHQWXUH HQWLW\ LQ &KLOH 6RFLHGDG &RQWUDFWXDO FODVVLÀFDWLRQ RI UHFRUGHG DVVHW DPRXQWV RU Minera Santa Barbara (SCMSB). Pursuant to WKH DPRXQWV DQG FODVVLÀFDWLRQ RI OLDELOLWLHV DQG Clause 4.1 of the Japonesa loan Agreement dated appropriate disclosures that may be necessary )HEUXDU\RQWKHODVWGD\RIHDFKPRQWK should the Company and the Consolidated Entity be SCMSB must pay any net income before tax to the unable to continue as going concerns. Company. (b) Principles of consolidation *LYHQWKDWWKHÀUVWVKLSPHQWRILURQRUHLVH[SHFWHG WRWDNHSODFHLQHDUO\ZLWKSURMHFWHGLQFRPH A controlled entity is any entity controlled by Admiralty EHLQJPLOOLRQSHUPRQWKWKH&RPSDQ\ZLOOKDYH 5HVRXUFHV1/&RQWUROLVDVGHÀQHGLQ$FFRXQWLQJ VXIÀFLHQWIXQGVWRUHSD\WKHORDQLQDFFRUGDQFHZLWK Standard AASB 1024 ‘Consolidated Accounts’. the loan agreement. Control exists where Admiralty Resources NL has the capacity to dominate the decision making in relation 6HFRQGO\ WKH &RPSDQ\ LV H[SHFWHG WR UHFHLYH DQ WR WKH ÀQDQFLDO DQG RSHUDWLQJ SROLFLHV RI DQRWKHU income stream (50% entitlement) from the sale of entity so that the entity operates with Admiralty iron ore equivalent to approximately $1.8 million per Resources NL to achieve the objectives of Admiralty month the receipt of which will assist the company Resources NL. Details of the controlled entities are in meeting its ongoing commitments as and when FRQWDLQHG LQ 1RWH WR WKH ÀQDQFLDO VWDWHPHQWV they fall due. Production of iron ore and shipment Consistent accounting policies are employed in the WKHUHRIDWWRQQHVSHUPRQWKLVVXVWDLQDEOH preparation and presentation of the consolidated for at least 4 years based on stockpile reserves ÀQDQFLDOVWDWHPHQWV alone not to mention iron ore to be extracted from H[LVWLQJPLQHV7KHÀUVWVKLSPHQWLVDQWLFLSDWHGIRU 7KH FRQVROLGDWHG ÀQDQFLDO VWDWHPHQWV LQFOXGH WKH WKHWKLUGTXDUWHURIWKHÀQDQFLDO\HDU information and results of each controlled entity from the date on which the company obtains control 7KLUGO\WKHFRPSDQ\KDVEHHQJLYHQDQLQGLFDWLRQ and until such time as the company ceases to from a substantial shareholder that it will exercise control such entity. RSWLRQVDWDQH[HUFLVHSULFHRIFHQWV HTXDOO\ RYHU WKH PRQWKV RI 2FWREHU 1RYHPEHU ,QSUHSDULQJWKHFRQVROLGDWHGÀQDQFLDOVWDWHPHQWV and December 2005. This will raise $8.75 million DOO LQWHUFRPSDQ\ EDODQFHV DQG WUDQVDFWLRQV DQG LQ FDVK ÁRZ IRU WKH FRPSDQ\ ,Q DGGLWLRQ DQRWKHU XQUHDOLVHG SURÀWV DULVLQJ ZLWKLQ WKH FRQVROLGDWHG holder of unlisted options has exercised 25 million entity are eliminated in full. options in September 2005 raising $2.5 million for the Company. /DVWO\WKH&RPSDQ\KDVWKHDELOLW\WRGHIHUFHUWDLQ expenditure with regards to the Boric Acid and Sodium Sulphate projects in Argentina if this is necessary which will conserve some of the Company’s cash ÁRZ 28 Admiralty Resources NL 2005 Annual Report (c) Mining tenements Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on Mining tenements are shown at cost. Ultimate WKHÀQDQFLDODVVHW recoupment of these costs is dependent on VXFFHVVIXOGHYHORSPHQWDQGFRPPHUFLDOH[SORLWDWLRQ (f) Income tax RUDOWHUQDWLYHO\VDOHRIWKHUHVSHFWLYHDUHDV,IDQ The consolidated entity adopts the liability method area of interest is abandoned or is considered to of tax-effect accounting whereby the income EH RI QRIXUWKHU FRPPHUFLDO LQWHUHVW WKH PLQLQJ tenement costs relating to the area are written off WD[ H[SHQVH LV EDVHG RQ WKH SURÀW IURP RUGLQDU\ activities adjusted for any permanent differences. against income in the year of abandonment. The H[SHFWHGQHWFDVKÁRZVKDYHQRWEHHQGLVFRXQWHG 7LPLQJGLIIHUHQFHVZKLFKDULVHGXHWRWKHGLIIHUHQW to their present values in determining recoverable accounting periods in which items of revenue amounts. and expense are included in the determination of (d) Exploration and evaluation expenditure DFFRXQWLQJ SURÀW DQG WD[DEOH LQFRPH DUH EURXJKW to account as deferred income tax or an asset Expenditure represents direct costs incurred. Costs GHVFULEHGDVIXWXUHLQFRPHWD[EHQHÀWDWWKHUDWH are accumulated in respect of areas of interest still of income tax applicable to the period in which the in the exploration and/or evaluation phase where EHQHÀWZLOOEHUHFHLYHGRUWKHOLDELOLW\ZLOOEHFRPH they have not yet reached a stage which permits payable. a reasonable assessment of the existence or otherwise of economically recoverable reserves. )XWXUHLQFRPHWD[EHQHÀWVDUHQRWEURXJKWWRDFFRXQW unless realisation of the asset is assured beyond Ultimate recoupment of these costs is dependent UHDVRQDEOH GRXEW )XWXUH LQFRPH WD[ EHQHÀWV LQ on successful development and commercial relation to tax losses are not brought to account H[SORLWDWLRQRUDOWHUQDWLYHO\VDOHRIWKHUHVSHFWLYH unless there is virtual certainty of realisation of the areas. If an area of interest is abandoned or is EHQHÀW considered to be of no commercial interest the accumulated exploration costs relating to the area 7KH DPRXQWV RI EHQHÀWV EURXJKW WR DFFRXQW RU which may be realised in the future is based on DUHZULWWHQRIIDJDLQVWSURÀWLQWKH\HDULQZKLFKWKH the assumption that no adverse change will occur decision to abandon the area is made. in income tax legislation and the anticipation :KHQ SURGXFWLRQ FRPPHQFHV WKH DFFXPXODWHG WKDW WKH FRQVROLGDWHG HQWLW\ ZLOO GHULYH VXIÀFLHQW costs for the relevant area of interest are amortised IXWXUH DVVHVVDEOH LQFRPH WR HQDEOH WKH EHQHÀW over the life of the area according to the rate of to be realised and comply with the conditions of depletion of economically recoverable reserves. deductibility imposed by the law. Any costs of site restoration are provided for in the production stages and included in the costs of that J 3URSHUW\SODQWDQGHTXLSPHQW stage. 3URSHUW\ SODQW DQG HTXLSPHQW DUH FDUULHG DW A regular review is undertaken of each area of FRVW OHVV ZKHUHDSSOLFDEOH DQ\ DFFXPXODWHG depreciation or amortisation. interest to determine the appropriateness of continuing to carry forward costs in relation to that Plant and Equipment area of interest. The carrying amount of plant and equipment is (e) Investments reviewed annually by directors to ensure it is not in excess of the recoverable amount from these Investments are valued at the lower of cost and assets. The recoverable amount is assessed on net realisable value. Investments in associates are accounted for under the equity method in the WKH EDVLV RI WKH H[SHFWHG QHW FDVK ÁRZV ZKLFK will be received from the assets employment and FRQVROLGDWHG ÀQDQFLDO VWDWHPHQWV DQG WKH FRVW VXEVHTXHQWGLVSRVDO7KHH[SHFWHGQHWFDVKÁRZV PHWKRGLQWKHFRPSDQ\ÀQDQFLDOVWDWHPHQWV2WKHU have not been discounted to their present values in investments are recorded at cost. determining recoverable amounts. Admiralty Resources NL 2005 Annual Report 29 Depreciation Ancillary costs incurred in connection with the arrangement of borrowings are deferred and 7KH GHSUHFLDEOH DPRXQW RIDOOÀ[HGDVVHWVDUH amortised over the period of the borrowing. depreciated over their useful lives to the consolidated entity using the diminishing value or prime cost (i) Cash PHWKRG FRPPHQFLQJ IURP WKH WLPH WKH DVVHW LV held ready for use. Leasehold improvements are )RUWKHSXUSRVHRIWKHVWDWHPHQWRIFDVKÁRZVFDVK includes cash on hand and at call deposits with depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of EDQNVRUÀQDQFLDOLQVWLWXWLRQV the improvements. M )RUHLJQRSHUDWLRQ The useful lives used for each class of depreciable Exchange differences relating to foreign currency assets are:- monetary items forming part of the net investment in a self- sustaining foreign operation is transferred &ODVVRI)L[HG$VVHW 8VHIXO/LIH on consolidation to the foreign currency translation 2IÀFH)XUQLWXUH \UV reserve. Leasehold Improvements 6 yrs )LQDQFLDO VWDWHPHQWV RI VHOIVXVWDLQLQJ IRUHLJQ controlled entities are translated at reporting date Plant & Equipment 4 – 8 yrs using the current method and exchange differences Motor Vehicles 4 – 7 yrs are taken directly to the foreign currency translation reserve. 7KH JDLQ RU ORVV RQ GLVSRVDO RI DOO À[HG DVVHWV LV determined as the difference between the carrying )LQDQFLDOVWDWHPHQWVRILQWHJUDWHGIRUHLJQRSHUDWLRQV amount of the asset at the time of disposal and the are translated at reporting using the temporal SURFHHGV RI GLVSRVDO DQG LV LQFOXGHG LQ WKH SURÀW method and exchange differences are taken to net from ordinary activities before income tax in the SURÀWRUORVVIRUWKHSHULRG year of disposal. (k) Employee entitlements (h) Interest bearing liabilities 3URYLVLRQ LV PDGH IRU WKH EHQHÀWV DFFUXLQJ WR Bills of exchange are recorded at an amount equal HPSOR\HHVLQUHVSHFWRIZDJHVDQGVDODULHVDQQXDO WRWKHQHWSURFHHGVUHFHLYHGZLWKWKHSUHPLXPRU OHDYHORQJVHUYLFHOHDYHDQGVLFNOHDYHZKHQLWLV discount amortised over the period until maturity. probable that settlement will be required and they Interest expense is recognised on an effective yield are capable of being measured reliably. basis. 'HEHQWXUHVEDQNORDQVDQGRWKHUORDQVDUHUHFRUGHG at an amount equal to the net proceeds received. Interest expense is recognised on an accrual basis. 30 Admiralty Resources NL 2005 Annual Report 3URYLVLRQVPDGHLQUHVSHFWRIZDJHVDQGVDODULHV (o) Leased assets DQQXDO OHDYH VLFN OHDYH DQG RWKHU HPSOR\HH /HDVHG DVVHWV FODVVLÀHG DV ÀQDQFH OHDVHV DUH EHQHÀWVH[SHFWHGWREHVHWWOHGZLWKLQPRQWKV recognised as assets. The amount initially brought are measured at their nominal values using the to account is the present value of minimum lease remuneration rate expected to apply at the time of payments. settlement. Provisions made in respect of other employee $ ÀQDQFH OHDVH LV RQH ZKLFKHIIHFWLYHO\WUDQVIHUV from the lessor to the lessee substantially all the EHQHÀWVZKLFKDUHQRWH[SHFWHGWREHVHWWOHGZLWKLQ 12 months are measured as the present value of the ULVNV DQG EHQHÀWV LQFLGHQWDO WR RZQHUVKLS RI WKH leased property. HVWLPDWHGIXWXUHFDVKRXWÁRZVWREHPDGHE\WKH consolidated entity in respect of services provided )LQDQFHOHDVHGDVVHWVDUHDPRUWLVHGRQDVWUDLJKW by employees up to reporting date. line basis over the estimated useful life of the asset. (l) Revenue recognition Interest revenue is recognised on a proportional basis )LQDQFH OHDVH SD\PHQWV DUH DOORFDWHG EHWZHHQ interest expense and reduction of lease liability taking into account the interest rates applicable to over the term of the lease. The interest expense WKHÀQDQFLDODVVHWV is determined by applying the interest rate implicit Dividend revenue is recognised when the right to in the lease to the outstanding lease liability at the receive a dividend has been established. beginning of each lease payment period. All revenue is stated net of the amount of goods and Operating lease payments are recognised as an services tax (GST). H[SHQVH RQ D EDVLV ZKLFK UHÁHFWV WKH SDWWHUQ LQ ZKLFKHFRQRPLFEHQHÀWVIURPWKHOHDVHGDVVHWDUH (m) Accounts payable consumed. Trade payables and other accounts payable are (p) Provisions recognised when the consolidated entity becomes obliged to make future payments resulting from the Provisions are recognised when the consolidated purchase of goods and services. HQWLW\KDVDSUHVHQWREOLJDWLRQWKHIXWXUHVDFULÀFH RIHFRQRPLFEHQHÀWVLVSUREDEOHDQGWKHDPRXQWRI Q )RUHLJQFXUUHQF\ the provision can be measured reliably. $OOIRUHLJQFXUUHQF\WUDQVDFWLRQVGXULQJWKHÀQDQFLDO :KHQVRPHRUDOORIWKHHFRQRPLFEHQHÀWVUHTXLUHG year are brought to account using the exchange rate to settle a provision are expected to be recovered LQ HIIHFW DW WKH GDWH RI WKH WUDQVDFWLRQ )RUHLJQ IURPDWKLUGSDUW\WKHUHFHLYDEOHLVUHFRJQLVHGDVDQ currency monetary items at reporting date are asset if it is probable that recovery will be received translated at the exchange rate existing at that and the amount of the receivable can be measured date. reliably. Exchange differences are brought to account in The amount recognised as a provision is the best WKHSURÀWDQGORVVLQWKHSHULRGLQZKLFKWKH\DULVH estimate of the consideration required to settle except that: WKHSUHVHQWREOLJDWLRQDWUHSRUWLQJGDWHWDNLQJLQWR i. exchange differences which relate to assets account the risks and uncertainties surrounding the under construction for future productive use obligation. Where a provision is measured using are included in the cost of those assets; and WKH FDVK ÁRZV HVWLPDWHG WR VHWWOH WKH SUHVHQW REOLJDWLRQLWVFDUU\LQJDPRXQWLVWKHSUHVHQWYDOXH ii. exchange differences on transactions entered RIWKRVHFDVKÁRZV into in order to hedge the purchase or sale of VSHFLÀFJRRGVDQGVHUYLFHVDUHGHIHUUHGDQG included in the measurement of the purchase or sale. Admiralty Resources NL 2005 Annual Report 31 (q) Receivables Compound instruments Trade receivables and other receivables are Compound instruments issued before 1 January recorded at amounts due less any allowance for DUHFODVVLÀHGDVHLWKHUOLDELOLWLHVRUDVHTXLW\ doubtful debts. ZKLFKHYHU LV WKH SUHGRPLQDQW FRPSRQHQW SDUW LQ accordance with the substance of the contractual )LQDQFH OHDVH UHFHLYDEOHV DUH LQLWLDOO\ UHFRUGHG DW arrangement. amounts equal to the present value of the minimum payments receivable plus the present value of any The component parts of compound instruments unguaranteed residual value expected to accrue at LVVXHG RQ RUDIWHU -DQXDU\ DUH FODVVLÀHG WKHHQGRIWKHOHDVHWHUP)LQDQFHOHDVHSD\PHQWV separately as liabilities and equity in accordance are allocated between interest revenue and with the substance of the contractual arrangement. reduction of the lease receivable over the terms of The liability component initially brought to account is the lease in accordance with the actuarial method. the present value of the future payments of interest and principal. The equity component initially brought %LOOV RI H[FKDQJH DUH UHFRUGHG DW DPRUWLVHG FRVW to account is determined by deducting the amount with revenue recognised on an effective yield basis. of the liability component from the amount of the (r) Recoverable amount of non-current assets compound instrument as a whole. Non-current assets are written down to recoverable (t) Acquisition of assets amount where the carrying value of any non-current Assets acquired are recorded at the cost of asset exceeds recoverable amount. In determining DFTXLVLWLRQ EHLQJ WKH SXUFKDVH FRQVLGHUDWLRQ WKHUHFRYHUDEOHDPRXQWRIQRQFXUUHQWDVVHWVWKH determined as at the date of acquisition plus costs H[SHFWHGQHWFDVKÁRZVKDYHQRWEHHQGLVFRXQWHG incidental to the acquisition. to their present value. In the event that settlement of all or part of the cash V )LQDQFLDOLQVWUXPHQWVLVVXHGE\WKHFRPSDQ\ consideration given in the acquisition of an asset is Debt and equity instruments GHIHUUHGWKHIDLUYDOXHRIWKHSXUFKDVHFRQVLGHUDWLRQ is determined by discounting the amount payable in 'HEW DQG HTXLW\ LQVWUXPHQWV DUH FODVVLÀHG DV the future to their present value as at the date of either liabilities or as equity in accordance with the acquisition. substance of the contractual arrangement. (u) Goods and services tax Transaction costs on the issue of equity instruments 5HYHQXHV H[SHQVHV DQG DVVHWV DUH UHFRJQLVHG QHWRIWKHDPRXQWRIJRRGVDQGVHUYLFHVWD[ *67 Transaction costs arising on the issue of equity except: instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments i. where the amount of GST incurred is not to which the costs relate. Transaction costs are the UHFRYHUDEOHIURPWKHWD[DWLRQDXWKRULW\LWLV costs that are incurred directly in connection with the recognised as part of the cost of acquisition issue of those equity instruments and which would of an asset or as part of an item of expense; not have been incurred had those instruments not or been issued. ii. for receivables and payables which are Interest and dividends recognised inclusive of GST. ,QWHUHVW DQG GLYLGHQGV DUH FODVVLÀHG DV H[SHQVHV 7KHQHWDPRXQWRI*67UHFRYHUDEOHIURPRUSD\DEOH RU DV GLVWULEXWLRQV RI SURÀW FRQVLVWHQW ZLWK WKH WR WKH WD[DWLRQ DXWKRULW\ LV LQFOXGHG DV SDUW RI FODVVLÀFDWLRQLQWKHVWDWHPHQWRIÀQDQFLDOSRVLWLRQRI receivables or payables. the related debt or equity instruments or component parts of compound instruments. 32 Admiralty Resources NL 2005 Annual Report &DVK ÁRZV DUH LQFOXGHG LQ WKH VWDWHPHQW RI FDVK The directors are of the opinion that the key ÁRZVRQDJURVVEDVLV7KH*67FRPSRQHQWRIFDVK differences in the consolidated entity’s accounting ÁRZVDULVLQJIURPLQYHVWLQJDQGÀQDQFLQJDFWLYLWLHV SROLFLHVZKLFKZLOODULVHIURPWKHDGRSWLRQRI,)56 ZKLFKLVUHFRYHUDEOHIURPRUSD\DEOHWRWKHWD[DWLRQ are: DXWKRULW\LVFODVVLÀHGDVRSHUDWLQJFDVKÁRZV Asset Impairment and Recoverable Amount (v) Tax consolidation Under AASB 136 Impairment of Assets (Australian /HJLVODWLRQWRDOORZJURXSVFRPSULVLQJDSDUHQWHQWLW\ HTXLYDOHQW WR ,)56 WKH UHFRYHUDEOH DPRXQW RI DQ DQGLWV$XVWUDOLDQUHVLGHQWZKROO\RZQHGHQWLWLHVWR asset or cash generating unit is determined as the elect to consolidate and be treated as a single entity higher of net selling price and value in use. This for income tax purposes was substantively enacted will result in changes in the consolidated entity’s RQ2FWREHU7KLVOHJLVODWLRQZKLFKLQFOXGHV FXUUHQWDFFRXQWLQJSROLF\WKHGHWHUPLQDWLRQRIFDVK ERWKPDQGDWRU\DQGHOHFWLYHHOHPHQWVLVDSSOLFDEOH generating units and the calculation of recoverable to the company. DPRXQWV EDVHG RQ GLVFRXQWHG FDVK ÁRZV 8QGHU the new policy it is likely that any impairment of At the date of this report the directors have assets will be recognised at an earlier date and QRW DVVHVVHG WKH ÀQDQFLDO HIIHFW LI DQ\ WKDW the amount of the write-down may be greater. The implementation of the tax consolidation of the tax exposure draft for Extractive Industries proposed consolidation system may have on the company and applying the impairment test using an expanded FRQVROLGDWHG HQWLW\ DQG DFFRUGLQJO\ WKH GLUHFWRUV GHÀQLWLRQ RI FDVK JHQHUDWLQJ XQLWV IRU H[SORUDWLRQ have not made a decision whether or not to elect to and evaluation assets. The IASB and AASB are be taxed as a single entity. currently deliberating on the application of the test 7KH ÀQDQFLDO HIIHFW RI WKH LPSOHPHQWDWLRQ RI WKH WR H[SORUDWLRQ DQG HYDOXDWLRQ DVVHWV VSHFLÀFDOO\ tax consolidation system on the company and where there have been no external transactions to consolidated entity has not been recognised in the support the value of the asset. Reliable estimation ÀQDQFLDOVWDWHPHQWV RI WKHIXWXUHÀQDQFLDOHIIHFWVRIWKLVFKDQJHLQ accounting policy is not possible as the conditions (w) Adoption of Australian Equivalents to and requirements under which impairment will be ,QWHUQDWLRQDO)LQDQFLDO5HSRUWLQJ6WDQGDUGV assessed are yet to be determined. The Company has commenced a transition of Tax Effect Accounting LWV DFFRXQWLQJ SROLFLHV DQG ÀQDQFLDO UHSRUWLQJ from current Australian Standards to Australian Under AASB 112 Income Taxes (Australian HTXLYDOHQWV RI ,QWHUQDWLRQDO )LQDQFLDO 5HSRUWLQJ (TXLYDOHQWWR,)56 WKHFRQVROLGDWHGHQWLW\ZLOOEH 6WDQGDUGV $,)56 'LUHFWRUVRIWKH&RPSDQ\KDYH required to use a balance sheet liability method given consideration to the key areas expected to be which focuses on the tax effects of transactions LPSDFWHGE\WKHXSFRPLQJWUDQVLWLRQWR$,)56DQG and other events that affect amounts recognised in DV WKH&RPSDQ\KDVD-XQH \HDU HQG SULRULW\ HLWKHUWKH6WDWHPHQWRI)LQDQFLDO3RVLWLRQRUDWD[ has been given to considering the preparation of EDVHGEDODQFHVKHHW3UHYLRXVO\WKHFDSLWDOJDLQV an opening balance sheet in accordance with AASB tax effects of revalued assets were not recognised. HTXLYDOHQWVWR,)56DVDW-XO\7KLVZLOOIRUP The recognition of tax losses will change from virtual the basis of accounting for Australian equivalents of certainty criteria to a probability requirement. The ,)56LQWKHIXWXUHDQGLVUHTXLUHGZKHQWKH&RPSDQ\ ÀQDQFLDOLPSDFWRIWD[HIIHFWLQJUHYDOXHGDVVHWVLV SUHSDUHVLWVÀUVWIXOO\,)56FRPSOLDQWÀQDQFLDOUHSRUW QRWFRQVLGHUHGWREHVLJQLÀFDQWDQGWKHWD[HIIHFWV for the year ended 30 June 2006. Set out below are RIWUDQVLWLRQLQJWR,)56DUH\HWWREHTXDQWLÀHG the key areas where accounting policies will change DQGPD\KDYHDQLPSDFWRQWKHÀQDQFLDOUHSRUWRIWKH consolidated entity. At this stage the consolidated entity and Company has not been able to reliably TXDQWLI\WKHLPSDFWVRQWKHÀQDQFLDOUHSRUW Admiralty Resources NL 2005 Annual Report 33 Financial Assets and Financial Liabilities 8QGHUFXUUHQW$XVWUDOLDQ*$$3ÀQDQFLDODVVHWVDQG ÀQDQFLDO OLDELOLWLHV DUH UHFRJQLVHG DW FRVW DW IDLU YDOXHRUDWQHWPDUNHWYDOXH2QDGRSWLRQRI$,)56 the consolidated entity will be required to classify WKHVH ÀQDQFLDO LQVWUXPHQWV LQWR YDULRXV VSHFLÀHG FDWHJRULHV7KHFODVVLÀFDWLRQRIWKHLQVWUXPHQWZLOO affect the instrument’s subsequent measurement – at amortised cost using the effective interest UDWHPHWKRGIDLUYDOXHZLWKPRYHPHQWVUHFRJQLVHG through equity or fair value recognised through the -DSRQHVD6LWH&KLOH'VDWHOOLWHYLHZ SURÀWDQGORVV7KHFRQVROLGDWHGHQWLW\LVHYDOXDWLQJ WKHGLIIHUHQWRSWLRQVDYDLODEOHEXWKDVQRWPDGHDQ\ Capitalisation of Exploration and Evaluation Costs determination at reporting date of the accounting to AASB 6 “Exploration for and Evaluation of Mineral EH DGRSWHG DQG FRQVHTXHQWO\ WKH LPSDFW RI WKH Resources” deals with the treatment of expenditures FKDQJH RQ WKH ÀQDQFLDO VWDWHPHQWV FDQQRW \HW EH associated with the exploration for and evaluation of TXDQWLÀHG mineral resources. AASB 6 requires the accounting Property, Plant & Equipment policy for the treatment of these expenditures to be consistent with the “area of interest” approach AASB 116 “Property Plant & Equipment” will prescribed by the superseded AASB 1022. require the carrying amounts of property plant and equipment to include the costs of dismantling and AASB 6 also requires any capitalised exploration UHPRYLQJLWHPVRISURSHUW\SODQWDQGHTXLSPHQWDW and evaluation expenditures (known as ‘exploration the conclusion of a lease term or similar arrangement. and evaluation assets’) to be tested for impairment This amount will adjust the current carrying amount when facts and circumstances suggest that the of certain items of property plant and equipment on carrying amount of an exploration and evaluation LQLWLDODGRSWLRQRI$,)56DQGZLOOEHGHSUHFLDWHGRYHU asset may exceed its recoverable amount. The facts the remaining useful life of that related asset. DQGFLUFXPVWDQFHVVSHFLÀHGE\$$6%DUHEURDGO\ consistent with the factors used to determine $Q\FRQVLGHUDWLRQZKLFKLVGHIHUUHGLVUHFRJQLVHG whether or not an entity can continue to recognise its as the net present value of that amount using an capitalised exploration and evaluation expenditures appropriate discount rate. XQGHU WKH VXSHUVHGHG $$6% )XUWKHU WKH level at which exploration and evaluation assets are to be tested for impairment is to be no larger than the area of interest to which the exploration DQG HYDOXDWLRQ DVVHW UHODWHV &RQVHTXHQWO\ WKH recognition and measurement requirements for capitalised exploration and evaluation expenditures are largely equivalent under AASB 6 and AASB 1022. 7KHLPSDFWRQWKHÀQDQFLDOVWDWHPHQWVLV\HWWREH determined. 34 Admiralty Resources NL 2005 Annual Report Consolidated Company 2005 2004 2005 2004 $$$$ Note 2 Revenue from ordinary activities — Other revenue - -- — Interest received 1RWH2WKHUH[SHQVHVIURPRUGLQDU\ activities Professional costs Employee costs Travel and entertainment Occupancy costs Borrowing costs - amortisation of debt issue costs - - - deferred purchase consideration - - - interest - other - - Overheads Loss on equity accounting --- Depreciation of non-current assets )RUHLJQFXUUHQF\WUDQVODWLRQORVVHV Diminution in inter-entity loans --- --- Note 4 Other operating expenses Rental expense on operating leases —minimum lease payments Transfer to provision for employee entitlements - - Admiralty Resources NL 2005 Annual Report 35 Consolidated Company 2005 2004 2005 2004 $$$$ 1RWH,QFRPH7D[([SHQVH 7KHSULPDIDFLHWD[EHQHÀWRQORVVIURPRUGLQDU\DFWLYLWLHVEHIRUHWD[LVUHFRQFLOHGWRWKHLQFRPHWD[DVIROORZV Loss from ordinary activities Prima facie tax payable on loss from ordinary activities before tax income tax at 30% (2004:30%) 7,0,1*',))(5(1&(6 Equity share of associate loss --- 3(50$1(17',))(5(1&(6 — non-deductible expenses - - — write down of investments ---- — write down of loans to controlled entities - - - — tax losses and timing differences not brought to DFFRXQWDVIXWXUHLQFRPHWD[EHQHÀWV Income tax expense attributable to loss from ordinary ---- activities 7KHIXWXUHLQFRPHWD[EHQHÀWVQRWEURXJKWWRDFFRXQWDVDVVHWV Tax losses - revenue Tax losses - capital 5HDOLVDWLRQRIWKHDERYHEHQHÀWVLVGHSHQGHQWRQ (a) the ability of the parent entity and the consolidated entity to derive future assessable income of a nature and RIDVXIÀFLHQWDPRXQWWRHQDEOHWKHEHQHÀWWREHUHDOLVHG (b) the ability of the parent and the consolidated entity to continue to comply with the conditions for deductibility imposed by law; and F QRFKDQJHVLQWD[OHJLVODWLRQDGYHUVHO\DIIHFWWKHUHDOLVDWLRQRIWKHEHQHÀWIURPWKHGHGXFWLRQV 1RWH'LUHFWRUV·UHPXQHUDWLRQDQGHTXLW\KROGLQJV D 7KHVSHFLÀHGGLUHFWRUVRI$GPLUDOW\5HVRXUFHV1/GXULQJWKH\HDUZHUH )DQN(GJH &KLHI([HFXWLYH2IÀFHUDQG([HFXWLYH&KDLUPDQ UHVLJQHG 3KLOOLS7KRPDV &KLHI([HFXWLYH2IÀFHU 6KDQH0XOFDK\ 1RQH[HFXWLYH UHVLJQHG $QWKRQ\'LFNVRQ 1RQH[HFXWLYH DSSRLQWHG -5RVV+DUSHU &KDLUPDQQRQH[HFXWLYH DSSRLQWHG 36 Admiralty Resources NL 2005 Annual Report (b) Parent Entity directors’ remuneration Primary Superannuation Salary & Fees Cash Bonus Total Contribution $$$$ 2005 )DQN(GJH -- Phillip Thomas -- Shane Mulcahy -- Anthony Dickson -- J.Ross Harper -- -- 2004 )DQN(GJH -- Phillip Thomas ---- Shane Mulcahy ---- Principles used to determine the nature and amount of remuneration The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. Non-executive directors )HHVDQGSD\PHQWVWRQRQH[HFXWLYHGLUHFWRUVUHÁHFWWKHGHPDQGVZKLFKDUHPDGHRQDQGWKHUHVSRQVLELOLWLHVRI the directors. The Board reviews the fees annually. 1RQ H[HFXWLYH GLUHFWRU·V IHHV DUH GHWHUPLQHG ZLWKLQ DQ DJJUHJDWH GLUHFWRU·V SRRO OLPLW ZKLFK LV SHULRGLFDOO\ recommended for approval by shareholders. The maximum pool currently stands at $250 000. Retirement allowances for directors There are currently no retirement allowances for directors. Executive pay )HHV DQG SD\PHQWV WR H[HFXWLYH SD\ UHÁHFW WKH GHPDQGV ZKLFK DUH PDGH RQ DQG WKH UHVSRQVLELOLWLHV RI WKH executive. Short-term incentives There are no short-term incentives plans in place. Admiralty Resources NL 2005 Annual Report 37 (c) Options and Rights Holdings 1XPEHURIRSWLRQVKHOGE\VSHFLÀHGGLUHFWRUV H[HFXWLYHV Balance Granted as Options Balance Lapsed Remuneration ([HUFLVHG No. No. No. No. No. Directors )DQN(GJH -- - 2,500,000 - - - (d) Shareholdings 1XPEHURIVKDUHVKHOGE\SDUHQWHQWLW\VSHFLÀHGGLUHFWRUV Balance Received as Options Net Chance Balance remuneration ([HUFLVHG Other* No. No. No. No. No. 3$5(17(17,7<',5(&7256 )DQN(GJH --- Shane Mulcahy ---- Phillip Thomas -- J Ross Harper ----- Anthony Dickson ----- TOTAL -- 1HWFKDQJHRWKHUUHIHUVWRVKDUHVSXUFKDVHGRUVROGGXULQJWKHÀQDQFLDO\HDU Note 7 Remuneration of auditors Consolidated Company 2005 2004 2005 2004 $$$$ Auditor of the parent entity ³$XGLWRIWKHÀQDQFLDOUHSRUW 1RWH'LYLGHQGV $W-XQHWKHEDODQFHRIWKH)UDQNLQJDFFRXQWRIWKHFRQVROLGDWHGHQWLW\DQGWKHSDUHQWHQWLW\ZDVQLO (2004: nil). 38 Admiralty Resources NL 2005 Annual Report 1RWH (DUQLQJVSHU6KDUH Consolidated 2005 2004 $$ $5(&21&,/,$7,212)($51,1*6721(7352),725/266 - Net loss Earnings used in the calculation of basic EPS Earnings used in the calculation of dilutive EPS %:(,*+7('$9(5$*(180%(52)25',1$5<6+$5(628767$1',1*'85,1* 7+(<($5 - Used in calculation of basic EPS - Used in calculation of dilutive EPS &&/$66,),&$7,212)6(&85,7,(6 The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share: — Options outstanding — Converting notes - 1RWH5HFHLYDEOHV Consolidated Company 2005 2004 2005 2004 $$$$ &855(17 Security deposits 950 950 950 Sundry receivables - - Goods and Services Tax (GST) receivable 121&855(17 Loans to controlled entities - - Loan to associate - - Less: Allowance for unlikely recoverability of loans - - - 7KHSDUHQWHQWLW\KDVHQWHUHGLQWRDORDQDJUHHPHQWZLWKWKHDVVRFLDWHRQ)HEUXDU\7KHORDQDJUHHPHQW KDVD86IDFLOLW\OLPLWLVVHFXUHGE\DÀ[HGDQGÁRDWLQJFKDUJHRYHUDOORIWKHDVVHWVRIWKHDVVRFLDWH bears interest at rate of 2% per annum above the USA benchmark 3 year commercial bond rate and matures in 0DUFK 7KHXQGUDZQIDFLOLW\DW-XQHDPRXQWVWR86 ,QFOXGHGLQORDQVWRFRQWUROOHGHQWLWLHVLVDORDQWR6ROJROG3W\/WGLQWKHDPRXQWIRU 7KLVORDQKDVQRÀ[HGUHSD\PHQWWHUPVDQGGRHVQRWEHDULQWHUHVW7KHSDUHQWHQWLW\KDVFRPPLWWHGWRVXSSRUWLQJ its controlled entities to enable them to pay their debts as and when they become due and payable. Admiralty Resources NL 2005 Annual Report 39 1RWH2WKHUÀQDQFLDODVVHWV Consolidated Company 2005 2004 2005 2004 $$$$ &855(17 6KDUHVLQOLVWHGFRUSRUDWLRQVDWPDUNHWYDOXH (a) 121&855(17 Shares - at cost (b) -- Shares in controlled entities - at cost (c) - - Investment in associate (c) --- Less: Provision for diminution (d) - - - D 7KH FRQVROLGDWHG HQWLW\ RZQV RUGLQDU\ VKDUHV LQ 6PDUW7UDQV +ROGLQJV/WGD PLQLQJ H[SORUDWLRQ DQGWHFKQRORJ\FRPSDQ\DQGWKLVLQYHVWPHQWUHSUHVHQWVDSSUR[LPDWHO\RIWKHLVVXHGFDSLWDORIWKDW FRPSDQ\7KHFDUU\LQJDPRXQWRIWKHLQYHVWPHQWLVDW-XQH7KHQHWIDLUYDOXHRIVKDUHVLQ OLVWHGHQWLWLHVLVGLVFORVHGLQ1RWHWRWKHÀQDQFLDOVWDWHPHQWV E 7KHFRQVROLGDWHGHQWLW\KROGV RIWKHRUGLQDU\VKDUHFDSLWDORI1LOQDY2UWKRSDHGLFV3W\/WG DFRPSDQ\LQYROYHGLQPLQLPDOO\LQYDVLYHKLSUHSODFHPHQWSURFHGXUHVDQGWRROVHWGHVLJQPRGLÀFDWLRQDQG manufacture. F 'XULQJWKHFXUUHQWÀQDQFLDO\HDU$GPLUDOW\5HVRXUFHV1/DFTXLUHG DVKDUHKROGLQJLQ)RUWXQH*OREDO +ROGLQJV&RUSRUDWLRQDFRPSDQ\LQFRUSRUDWHGLQWKH%ULWLVK9LUJLQ,VODQGVZKLFKLQWXUQKROGVD LQWHUHVW in the associate Sociedad Contractual Minera Santa Barbara S.A. (d) The investment in certain controlled entities was fully provided for by the directors in the 30 June 2002 year having regard to the net assets of those entities. 1RWH&RQWUROOHG(QWLWLHV Admiralty Resources NL is the ultimate parent entity of the group. The country of incorporation is Australia. Country of 1DPHRI(QWLW\ Principal Activity 3HUFHQWDJH2ZQHG Incorporation 2005 2004 ADY Resources Limited (formerly Australia Mineral Exploration 100% 100% Argentina Diamonds Ltd) Greater Australian Gold NL Australia Gold Exploration 100% 100% Moonlight Mining NL Australia Gold Exploration 100% 100% Solgold Pty Ltd (a) Australia Mineral Exploration 100% 100% Three Star Mining NL Australia Mineral Exploration 100% 100% )RUWXQH*OREDO+ROGLQJV&RUSRUDWLRQ British Virgin Islands Holding Entity 100% Nil D 7KLVFRQWUROOHGHQWLW\LVFODVVLÀHGDVDVPDOOSURSULHWDU\FRPSDQ\DQGLQDFFRUGDQFHZLWKWKH&RUSRUDWLRQV$FW LVUHOLHYHGIURPWKHUHTXLUHPHQWWRSUHSDUHDXGLWDQGORGJHDÀQDQFLDOUHSRUW 40 Admiralty Resources NL 2005 Annual Report 1RWH3URSHUW\SODQWDQGHTXLSPHQW Consolidated Company 2005 2004 2005 2004 $$$$ 3/$17$1'(48,30(17 At cost Accumulated depreciation 027259(+,&/(6 At cost -- Accumulated depreciation -- -- 2)),&()851,785( At cost Accumulated depreciation Net book value $029(0(176,1&$55<,1*$028176 0RYHPHQWLQWKHFDUU\LQJDPRXQWVIRUHDFKFODVVRISURSHUW\SODQWDQGHTXLSPHQWEHWZHHQWKHEHJLQQLQJDQGWKH HQGRIWKHFXUUHQWÀQDQFLDO\HDU 3ODQW (TXLSPHQW Motor Vehicles 2IÀFH)XUQLWXUH Total $ $ $ $ &2162/,'$7(' Balance at the beginning of year Additions ---- Written off Depreciation expense Carrying amount at the end of year &203$1< Balance at the beginning of year - Additions ---- Written off -- Depreciation expense - Carrying amount at the end of year - Admiralty Resources NL 2005 Annual Report 41 1RWH2WKHUDVVHWV Consolidated Company 2005 2004 2005 2004 $$$$ &855(17 Debt issue costs (a) - - Prepayments - - 121&855(17 Development and exploration interest - at cost (b) Debt issue costs (a) - - (a) Total issue costs relating to converting notes - - Costs attributable to equity component of - - converting notes (note 17(b)) - - Amortisation - - - - E ,QDFFRUGDQFHZLWK$FFRXQWLQJ6WDQGDUG$$6%´5HYDOXDWLRQRI1RQ&XUUHQW$VVHWVµWKHGLUHFWRUVKDYH GHHPHGWKDWGHYHORSPHQWDQGH[SORUDWLRQFRVWVDUHWREHUHFRUGHGDWFRVWIRUÀQDQFLDOUHSRUWLQJSXUSRVHV 7KLVLVFRQVLVWHQWZLWKWKHSULRUÀQDQFLDO\HDU$PRUWLVDWLRQLVQRWEHLQJFKDUJHGSHQGLQJWKHFRPPHQFHPHQW of production. 1RWH3D\DEOHV &855(17 Trade payables and accruals Deferred purchase consideration - - 1RWH,QWHUHVWEHDULQJOLDELOLWLHV 121&855(17 Converting notes - - - - FRQYHUWLQJQRWHVZHUHLVVXHGRQ )HEUXDU\DWDQLVVXHSULFHRISHUQRWH7KHÀUVW LQVWDOPHQWRI ZDVSDLGRQWKHGDWHRILVVXH7KHVHFRQGDQGÀQDOLQVWDOPHQWLVGXHRQ )HEUXDU\ 2007. The notes convert into ordinary shares on the basis of 100 ordinary shares for every note converted on 9 )HEUXDU\)ROORZLQJFRQYHUVLRQWKHKROGHUVKDYHWKHRSWLRQWRSXWWKHVKDUHVWRWKHFRPSDQ\ZLWKLQGD\V 7KHFRQYHUWLQJQRWHFRQWDLQVERWKDÀQDQFLDOOLDELOLW\DQGDQHTXLW\HOHPHQWDQGDFFRUGLQJO\WKHFRPSRQHQWSDUWV have been separately accounted for in accordance with the substance of the contractual arrangement. 42 Admiralty Resources NL 2005 Annual Report 1RWH&RQWULEXWHG(TXLW\ Consolidated Company 2005 2004 2005 2004 $$$$ IXOO\ (a) paid ordinary shares Option premium on converting notes (b) - - Option premium (c) - - )XOO\SDLGRUGLQDU\VKDUHVFDUU\RQHYRWHSHUVKDUHDQGWKHULJKWWRGLYLGHQGV $ 25',1$5<6+$5(6 $WWKHEHJLQQLQJRIWKHÀQDQFLDO\HDU Shares issued ³RQ$SULO - - ³RQ0DUFK L - - ³RQ-XQH LL - - Transaction cost relating to issue of - - shares $WWKHHQGRIWKHÀQDQFLDO\HDU OPTIONS No. No. No. No. $WWKHEHJLQQLQJRIWKHÀQDQFLDO\HDU Options issued - - — 28 January 2005 Options exercised - - — 3 June 2005 Options expired - - — 31 July 2004 $WWKHHQGRIWKHÀQDQFLDO\HDU L 2Q0DUFKWKHFRPSDQ\DOORWWHGVKDUHVDWDQLVVXHSULFHRISHUVKDUHWRWDOOLQJ WR:\QGKDP([SORUDWLRQV6$DVSDUWFRQVLGHUDWLRQIRUWKHDFTXLVLWLRQRIWKHFRQWUROOHGHQWLW\)RUWXQH*OREDO+ROGLQJV Corporation (refer note 22(c)). LL 2Q-DQXDU\WKHFRPSDQ\LVVXHGRSWLRQVWR070+ROGLQJV $XVWUDOLD 3W\/WGH[HUFLVDEOHDW SHUVKDUHRQRUEHIRUH1RYHPEHUIRUDWRWDOFRQVLGHUDWLRQRI6KDUHKROGHUVDWWKH$QQXDO*HQHUDO 0HHWLQJKHOGRQ'HFHPEHUDSSURYHGWKLVLVVXH'XULQJWKH\HDU070+ROGLQJV $XVWUDOLD 3W\/WGVROGRI WKHVHRSWLRQVWR/HYHUDJHG&DSLWDO3W\/LPLWHG2Q-XQH/HYHUDJHG&DSLWDO3W\/LPLWHGH[HUFLVHG RSWLRQVOHDYLQJLWZLWKDEDODQFHRIRSWLRQVDVDW-XQH Admiralty Resources NL 2005 Annual Report 43 % (48,7<&20321(172)&219(57,1*127(6 7KLVUHSUHVHQWVWKHFRQYHUVLRQULJKWVRQWKHÀUVWLQVWDOPHQWRIWKH FRQYHUWLQJQRWHV7KHQRWHV FRQYHUWLQWRRUGLQDU\VKDUHVRQ )HEUXDU\)RUHYHU\QRWHWKHKROGHUZLOOUHFHLYHRQHKXQGUHGRUGLQDU\VKDUHV and has the option to put the shares to the company within 30 days of conversion (refer note 16). The option SUHPLXPLVQHWRILVVXHFRVWVRI QRWH D & 237,2135(0,80 7KHRSWLRQSUHPLXPUHSUHVHQWVWKHFRQVLGHUDWLRQUHFHLYHGRQWKHLVVXHRIRSWLRQVGXULQJWKH\HDU 1RWH$FFXPXODWHGORVVHV Consolidated Company 2005 2004 2005 2004 $$$$ %DODQFHDWWKHEHJLQQLQJRIWKHÀQDQFLDO year Net loss attributable to the members of the parent entity %DODQFHDWWKHHQGRIWKHÀQDQFLDO\HDU 1RWH &DSLWDODQGOHDVLQJFRPPLWPHQWV Consolidated Company 2005 2004 2005 2004 $$$$ $23(5$7,1*/($6(&200,70(176 Non-cancellable operating leases 2IÀFH3UHPLVHV — not later than 1 year - - — later than 1 year but not later than 5 ---- years - - 44 Admiralty Resources NL 2005 Annual Report Consolidated Company 2005 2004 2005 2004 $$$$ % &$3,7$/(;3(1',785( &200,70(176 The consolidated entity is committed to capital expenditure on its various mining tenements and leases as follows: Payable — not later than 1 year - — later than 1 year but not later than 5 ---- years - Consolidated entity’s share of associate’s capital expenditure commitments Payable — not later than 1 year --- — later than 1 year but not later than 5 ---- years --- Note 20 Contingent liabilities and contingent assets The directors are not aware of any contingent liabilities in existence at the date of this report. Negotiations were successful with Cougar Metals NL to acquire an option over the Company’s Pyke Hill Nickel deposit. Cougar Metals NL have six months to decide whether to mine the prospect. Admiralty can receive up to LIWKLVRSWLRQLVH[HUFLVHGDVZHOODVVXEVWDQWLDORQJRLQJUR\DOW\IURPPLQLQJUHYHQXHV Admiralty Resources NL 2005 Annual Report 45 OLPLQDWLRQV &RQVROLGDWHG(QWLW\ ( ------nts. ------ EHLQJPLQHUDOH[SORUDWLRQ $XVWUDOLDDQG$UJHQWLQD aArgentinaChile ------$$$$ $$$$ Australi 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 ss segments ss om ordinaryom es d liabilities include all assets used in and all liabilities generated by the segme ns rting – Busine – rting pe ex ion and amortisation and ion of result ed revenues and expenses are those directly attributable to the segments. at 18( ties oc ll HUDWLQJSURÀWEHIRUHLQFRPHWD[ HFRQVROLGDWHGHQWLW\RSHUDWHVLQWZRJHRJUDSKLFDOORFDWLRQV HFRQVROLGDWHGHQWLW\RSHUDWHVVROHO\LQRQHEXVLQHVVVHJPHQW Unallocated revenue - Una 2S $66(76 assets Segment /,$%,/,7,(6 liabilities Segment 27+(5 non-currentAcquisitions of assets segment 5(9( External revenue External Total revenue fr activi 5(68/7 Segment Depreciat assets segment 1RWH6HJPHQW5HSRUWLQJ Primary reporting - Geographical segments 7K Accounting Policies Segment Segment assets an Segment Secondary repo Secondary 7K 46 Admiralty Resources NL 2005 Annual Report Note 22 Cash Flow Information Consolidated Company 2005 2004 2005 2004 $$$$ $ 5(&21&,/,$7,212)&$6+ &DVKDWWKHHQGRIWKHÀQDQFLDO\HDUDVVKRZQLQWKHVWDWHPHQWRIFDVKÁRZVLVUHFRQFLOHGWRLWHPVLQWKHVWDWHPHQWRI ÀQDQFLDOSRVLWLRQDVIROORZV Cash % 5(&21&,/,$7,212)&$6+)/2:)52023(5$7,216:,7+/266)52025',1$5<$&7,9,7,(6$)7(5,1&20(7$; Loss from ordinary activities after income tax 1RQFDVK ÁRZV LQ ORVV IURP RUGLQDU\ activities —Depreciation and assets written off —Exploration costs written off --- —Write-downs to recoverable amount --- Inferred interest costs of converting - - notes Inferred interest costs of deferred - - purchase consideration Equity accounted loss of associated --- company Amortisation of debt issue costs - - Unrealised foreign exchange loss - - Changes in assets and liabilities —(Increase)/decrease in trade and term debtors —Decrease/(increase) in prepayments (864) (864) —Increase/(decrease) in trade creditors and accruals —Decrease in provisions - - ³&DVKÁRZVIURPRSHUDWLRQV & %86,1(66$&48,5(' 'XULQJWKHÀQDQFLDO\HDU)RUWXQH*OREDO Holdings Corporation was acquired. Details of the acquisition are as follows: Consideration Cash --- Ordinary shares --- Deferred purchase --- --- Admiralty Resources NL 2005 Annual Report 47 Consolidated Company 2005 2004 2005 2004 $$$$ Fair value of net assets acquired Investment in associate --- &DVKRXWÁRZRQDFTXLVLWLRQ --- ' &5(',767$1'%<$55$1*(0(176:,7+%$1.6 7KHUHDUHQRVWDQGE\RUXQXVHGFUHGLWIDFLOLWLHVDYDLODEOHWRWKHFRQVROLGDWHGHQWLW\RUSDUHQWHQWLW\DW\HDUHQG RWKHUWKDQWKRVHGLVFORVHGLQ1RWH D WRWKHÀQDQFLDOVWDWHPHQWV 1RWH(YHQWVVXEVHTXHQWWRUHSRUWLQJGDWH 2Q$XJXVW/HYHUDJHG&DSLWDO3W\/LPLWHGH[HUFLVHGRSWLRQVDWFHQWVHDFKWKHUHE\LQMHFWLQJ $2.5m into the bank account of the company. $1.4m of this money was allocated and sent to the joint venture partners in Chile to continue funding various expenditure commitments. 2Q6HSWHPEHUWKHGLUHFWRUVRIWKHFRPSDQ\HQWHUHGLQWRDORDQIDFLOLW\DJUHHPHQWZLWK3HUROLQ,QYHVWPHQWV 3W\/LPLWHGIRUP QRWH D 7KHIDFLOLW\LVDYDLODEOHZKHQUHTXLUHGDQGKDVEHHQFRQÀUPHGLQZULWLQJ7KHSULQFLSDO use of this facility will be to continue funding the capital expenditure and operating expenditure commitments in Chile and Argentina. 1RWH5HODWHGSDUW\DQGVSHFLÀHGH[HFXWLYHVGLVFORVXUHV Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. (a) Equity interests in related parties Equity interests in controlled entities Details of the percentage of ordinary shares held in controlled entities are disclosed in note 12 to the ÀQDQFLDOVWDWHPHQWV Equity interests in associates 'HWDLOVRILQWHUHVWVLQDVVRFLDWHVDUHGLVFORVHGLQQRWHWRWKHÀQDQFLDOVWDWHPHQWV Equity interests in other related parties 'HWDLOVRILQWHUHVWVLQRWKHUUHODWHGSDUWLHVDUHGLVFORVHGLQQRWHWRWKHÀQDQFLDOVWDWHPHQWV'XULQJWKH ÀQDQFLDO\HDUWKHFRQVROLGDWHGHQWLW\SXUFKDVHGDLQWHUHVWLQ1LOQDY2UWKRSDHGLFV3W\/WG7KH &KLHI([HFXWLYH2IÀFHU3KLOOLS7KRPDVLVDOVRDGLUHFWRURI1LOQDY2UWKRSDHGLFV3W\/WG E 6SHFLÀHGGLUHFWRUV·DQGVSHFLÀHGH[HFXWLYHV·UHPXQHUDWLRQ 'HWDLOVRIVSHFLÀHGGLUHFWRUV·DQGVSHFLÀHGH[HFXWLYHV·UHPXQHUDWLRQDUHGLVFORVHGLQQRWHWRWKHÀQDQFLDO statements. F 6SHFLÀHGGLUHFWRUV·DQGVSHFLÀHGH[HFXWLYHV·HTXLW\KROGLQJV 'HWDLOVRIVSHFLÀHGGLUHFWRUV·DQGVSHFLÀHGH[HFXWLYHV·HTXLW\KROGLQJVDUHGLVFORVHGLQQRWHWRWKHÀQDQFLDO statements. (d) Loans 7KHUHZHUHQRORDQVWRVSHFLÀHGGLUHFWRUVDQGVSHFLÀHGH[HFXWLYHV·GXULQJWKHÀQDQFLDO\HDU 48 Admiralty Resources NL 2005 Annual Report Note 25 Financial Instruments Interest Rate Risk 7KHFRQVROLGDWHGHQWLW\·VH[SRVXUHWRLQWHUHVWUDWHULVNZKLFKLVWKHULVNWKDWDÀQDQFLDOLQVWUXPHQW·VYDOXHZLOO ÁXFWXDWHDVDUHVXOWRIFKDQJHVLQPDUNHWLQWHUHVWUDWHVDQGWKHHIIHFWLYHZHLJKWHGDYHUDJHLQWHUHVWUDWHVRQ FODVVHVRIÀQDQFLDODVVHWVDQGÀQDQFLDOOLDELOLWLHVLVDVIROORZV Weighted Floating Non- Average 2005 Interest Fixed interest rate maturity interest Total (IIHFWLYH Rate Bearing Interest Rate /HVVWKDQ \HDUV More than year 5 years % $ $ $ $$$ ),1$1&,$/$66(76 Cash 3.50 --- Receivables 6.1 --- Listed Shares ---- Shares at cost ---- Investment in ---- associate 7RWDO)LQDQFLDO$VVHWV FINANCIAL /,$%,/,7,(6 Trade payables and 10.0 - - - accruals Deferred purchase 12.0 - -- - consideration Converting notes 12.0 - - -- 7RWDO)LQDQFLDO - - Liabilities Credit Risk 7KHPD[LPXPH[SRVXUHWRFUHGLWULVNH[FOXGLQJWKHYDOXHRIDQ\FROODWHUDORURWKHUVHFXULW\DWEDODQFHGDWHWR UHFRJQLVHGÀQDQFLDODVVHWVLVWKHFDUU\LQJDPRXQWQHWRIDQ\DOORZDQFHIRUGRXEWIXOGHEWVRIWKRVHDVVHWVDV GLVFORVHGLQWKHVWDWHPHQWRIÀQDQFLDOSRVLWLRQDQGQRWHVWRWKHÀQDQFLDOVWDWHPHQWV The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors XQGHUÀQDQFLDOLQVWUXPHQWVHQWHUHGLQWRE\WKHFRQVROLGDWHGHQWLW\ Admiralty Resources NL 2005 Annual Report 49 Weighted Floating Non- Average 2004 Interest Fixed interest rate maturity interest Total (IIHFWLYH Rate Bearing Interest Rate /HVVWKDQ \HDUV More than year 5 years % $ $ $ $$$ ),1$1&,$/$66(76 Cash 6.4 --- Receivables ---- Listed Shares ---- Shares at cost ---- 7RWDO)LQDQFLDO$VVHWV --- FINANCIAL /,$%,/,7,(6 Trade payables and 10.0 - - - accruals 7RWDO)LQDQFLDO ---- Liabilities Credit risk 7KHPD[LPXPH[SRVXUHWRFUHGLWULVNH[FOXGLQJWKHYDOXHRIDQ\FROODWHUDORURWKHUVHFXULW\DWEDODQFHGDWHWR UHFRJQLVHGÀQDQFLDODVVHWVLVWKHFDUU\LQJDPRXQWQHWRIDQ\DOORZDQFHIRUGRXEWIXOGHEWVRIWKRVHDVVHWVDV GLVFORVHGLQWKHVWDWHPHQWRIÀQDQFLDOSRVLWLRQDQGQRWHVWRWKHÀQDQFLDOVWDWHPHQWV The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors XQGHUÀQDQFLDOLQVWUXPHQWVHQWHUHGLQWRE\WKHFRQVROLGDWHGHQWLW\ Net fair values 7KH FRQVROLGDWHG HQWLW\·V DJJUHJDWH QHW IDLU YDOXHV RI ÀQDQFLDODVVHWVDQG OLDELOLWLHV ERWK UHFRJQLVHG DQG XQUHFRJQLVHGDWEDODQFHGDWHLVDVIROORZV Aggregate net fair value 2005 2004 $$ ),1$1&,$/$66(76 Cash Receivables Listed Shares Shares at cost Investment in associate - 7RWDO)LQDQFLDO$VVHWV 50 Admiralty Resources NL 2005 Annual Report Aggregate net fair value 2005 2004 $$ ),1$1&,$//,$%,/,7,(6 Trade payables and accruals Deferred purchase consideration - Converting notes - 7RWDO)LQDQFLDO/LDELOLWLHV 7KH IROORZLQJ PHWKRGV DQG DVVXPSWLRQV DUH XVHG WR GHWHUPLQH WKHQHWIDLUYDOXHVRIÀQDQFLDO DVVHWV DQG liabilities: 5HFRJQLVHGÀQDQFLDOLQVWUXPHQWV 7KHFDUU\LQJDPRXQWIRUFDVKUHFHLYDEOHVVKDUHVDWFRVWWUDGHFUHGLWRUVDQGHPSOR\HHSURYLVLRQVDSSUR[LPDWHV fair value. Listed shares )RUÀQDQFLDOLQVWUXPHQWVWUDGHGLQRUJDQLVHGÀQDQFLDOPDUNHWVIDLUYDOXHLVWKHFXUUHQWPDUNHWELGIRUWKHDVVHW The Board reviews the values of the shares held at balance date. Where it is considered necessary a write down of the carrying amount of individual investments is made. At balance date a write down was made for current and non-current assets. The portfolio of shares will continue to be monitored by the Board in accordance with the company’s corporate governance. 7KHQHWIDLUYDOXHVRIRWKHUÀQDQFLDODVVHWVDQGÀQDQFLDOOLDELOLWLHVDUHGHWHUPLQHGLQDFFRUGDQFHZLWKJHQHUDOO\ DFFHSWHGSULFLQJPRGHOVEDVHGRQGLVFRXQWHGFDVKÁRZWKHRU\ Admiralty Resources NL 2005 Annual Report 51 1RWH1RQKHGJHGIRUHLJQFXUUHQF\EDODQFHV 7KH$XVWUDOLDQGROODUHTXLYDOHQWRIIRUHLJQFXUUHQF\EDODQFHVLQFOXGHGLQWKHÀQDQFLDOVWDWHPHQWVZKLFKDUHQRW effectively hedged are as follows: Consolidated Company 2005 2004 2005 2004 $$$$ Argentine Peso Cash -- United States Dollars Loan to associate - - Deferred purchase consideration - - Chliean Peso Cash - Note 27 Investments accounted for using the equity method Name of entity Principal Associate activity Ownership interest Consolidated carrying amount 2005 2004 2005 2004 %%$$ Sociedad Contractual Minera Santa Barbara S.A. Mining 49 - - (Incorporated in Chile) 029(0(17,1,19(670(17,1$662&,$7( Consolidated 2005 2004 $$ Acquisition of interest in associate - Share of loss from ordinary activities after income tax expense - (TXLW\DFFRXQWHGDPRXQWRILQYHVWPHQWDWWKHHQGRIWKHÀQDQFLDO\HDU - 52 Admiralty Resources NL 2005 Annual Report 6800$5,6('),1$1&,$/326,7,212)$662&,$7( Consolidated 2005 2004 $$ &XUUHQWDVVHWV Cash - Marketable securities - Prepayments - Other - 1RQFXUUHQWDVVHWV Investments - Plant & equipment - Motor vehicles - Development & exploration interest - &XUUHQWOLDELOLWLHV Payables - 1RQ²FXUUHQWOLDELOLWLHV Loans - Net Liabilities - Net Loss - 6+$5(2)5(6(59(6$775,%87$%/(72$662&,$7( Accumulated losses $WWKHEHJLQQLQJRIWKHÀQDQFLDO\HDU -- $WWKHHQGRIWKHÀQDQFLDO\HDU - &$3,7$/&200,70(176 The consolidated entity’s share of the capital commitments of the associate are disclosed in note 19. Admiralty Resources NL 2005 Annual Report 53 Directors’ Declaration The directors declare that: D 7KH DWWDFKHG ÀQDQFLDO VWDWHPHQWV DUH QRWHV thereto comply with Accounting Standards; E 7KH DWWDFKHG ÀQDQFLDO VWDWHPHQWV DQG QRWHV WKHUHWRJLYHDWUXHDQGIDLUYLHZRIWKHÀQDQFLDO position and performance of the company and consolidated entity; F ,QWKHGLUHFWRUV·RSLQLRQWKHDWWDFKHGÀQDQFLDO statements and notes thereto are in accordance with the Corporations Act 2001; and (d) In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the directors made pursuant to s295(5) of the Corporations Act 2001. Director Dated this 29th day of September 2005 54 Admiralty Resources NL 2005 Annual Report Admiralty Resources NL 2005 Annual Report 55 56 Admiralty Resources NL 2005 Annual Report Admiralty Resources NL 2005 Annual Report 57 Additional information for listed companies 1. The shareholder information set out below was applicable as at 29th July 2005. (a) Distribution of Shareholders by Class Category Ordinary Shares No. of Holders Unlisted Options No. of Holders (size of holding) -- 567 - - 434-- -- DQGRYHU 591 - - (b) The number of shareholdings held in less (e) Voting Rights than marketable parcels is NIL as at 29th July 2005. Every Member is entitled to be present at a meeting and may vote. Options do not carry (c) The number of holders of each class of equity a right to vote. security as at 29th July 2005 was: 2QDVKRZRIKDQGVHYHU\0HPEHUKDVRQH Class of security Number vote. Ordinary fully paid shares Unlisted options Nil On a poll every Member has: (d) The names of the substantial shareholders - one vote for each fully paid share; and listed in the holding company’s register as at - voting rights pro rata to the amount paid 29th July 2005 are: up on each partly paid share held by the Shareholder No. Ordinary Member. shares MTM Holdings (Australia) Pty Ltd 58 Admiralty Resources NL 2005 Annual Report f) 20 Largest Shareholders - Ordinary Capital as at 29th July 2005. Number of Ordinary % Held of Issued Name Fully Paid Shares Ordinary Capital Held 1. MTM Holdings (Australia) Pty Ltd 11.73% 2. ANZ Nominees Ltd 5.11% 3. Leveraged Capital Pty Ltd 5.10% 4. Wyndham Explorations S.A. 3.06% 5. Index Options Australia Pty Ltd 2.61% 6. Barrios Pty Ltd 1.42% 7. : .$VVRFLDWHV3W\/WG 1.31% 8. Mr Paul Dickson Mrs Carolyn Dickson 1.21% 9. Clynom Nominees Pty 1.02% 10. Tresspassers “W” Pty Ltd 1.02% 11. RJ Brown Holdings Pty Ltd 0.98% 12. WWB Investments Pty Ltd 0.94% 13. Mr Garth Ross 0.88% 14. Mr Bruce Hodgens Mrs Barbara Susan Hodgens 0.85% 15. Jodaway Pty Ltd 0.72% 16. )RUEDU&XVWRGLDQV/WG 0.66% 17. Mr Warren William Brown Mrs Marilyn Helena Brown 0.61% 18. Mrs Rochelle Bull 0.61% 19. Craig Doherty Plumbing Services P/L 0.55% 20. Intrada International Pty Ltd 0.53% 40.92% 2. The name of the company secretary is 4. The register of securities is held at the Stephen Charles Prior. following address: 3. The address and telephone number of the 4XHHQVODQG DGPLQLVWUDWLYHRIÀFHDQGUHJLVWHUHGRIÀFHDUH Computershare Investor Services Pty Ltd as follows: /HYHO&HQWUDO3OD]D2QH $GPLQLVWUDWLYH2IÀFH 4XHHQ6WUHHW /HYHO4XHHQ6WUHHW %ULVEDQH4XHHQVODQG 0HOERXUQH9LFWRULD Telephone: (07) 3237 2173 Telephone: (03) 9642 3535 )DFVLPLOH )DFVLPLOH 5. Stock Exchange Listing 4XRWDWLRQ KDVEHHQJUDQWHGIRUDOOWKH 5HJLVWHUHG2IÀFH ordinary shares of the company on all Member C/- Prior & Co. Pty. Ltd Exchanges of the Australian Stock Exchange /HYHO4XHHQ6WUHHW Limited. Melbourne Victoria 3000 Telephone: (03) 9670 1838 )DFVLPLOH Admiralty Resources NL 2005 Annual Report 59 6. Vendor Securities There are no restricted securities on issue as at 29th July 2005. 7. Unquoted Securities 20 Largest Holders of Unlisted Options as at 24th July 2005. Number of unlisted Name % options held 1. MTM Holdings (Australia) Pty Ltd 58.33% 2. Leveraged Capital Pty Ltd 41.67% 100.00% 60 Admiralty Resources NL 2005 Annual Report Supplementary Information Iron ore stock pile Sociedad Contractual Minera Santa Barbara &RUSRUDWH3URÀOH Rincon Salar Lithium, Borate and other minerals - Argentina Admiralty Resources is a Public Company listed RQ WKH $XVWUDOLDQ 6WRFN ([FKDQJH ZLWK GLYHUVLÀHG • Major multi-elemental brine resource located in PLQHUDOLQWHUHVWVLQ$XVWUDOLD&KLOHDQG$UJHQWLQD the Salta Province of Argentina. The company is focussing on the development of • In close proximity to two of the largest producers the Japonesa iron ore mines in Chile and the Rincon of lithium and potassium in the world. Salar in Argentina. • The tenements cover an area in excess of 250 Sociedad Contractual Minera Santa square kilometres. Barbara Iron Ore Project - Chile • 5HVRXUFHGXHGLOLJHQFH H[WUDFWLRQPHWKRGV • Admiralty Resources NL acquired a 49% interest IRU NH\ UHVRXUFHV KDYH EHHQ ÀQDOLVHG .H\ in the Sociedad Contractual Minera Santa UHVRXUFHV DUH OLWKLXP FKORULGH SRWDVVLXP Barbara iron ore mines. When sales commence FKORULGH VRGLXP VXOSKDWH ERULF DFLG DQG Admiralty Resources will have a 50% interest. borates. • Estimated resource of at least 41 million tonnes • Capital expenditure program for development of iron ore with an iron content range of 60% of the Rincon Salar has been established. - 67%. • Current market purchase price per tonne for • 6WRFNSLOHVRIPLOOLRQWRQQHVRILURQRUHÀQHV OLWKLXPFKORULGHH[FHHGV86SHUWRQQH • &RPHWDOV,QFEDVHGLQ1HZ Admiralty Resources NL 2005 Annual Report 61 Pyke Hill - Western Australia are established for each project to ensure environmental protection. Negotiations were successful with Cougar Metals NL to acquire an option over the Company’s Pyke Hill Admiralty Resources are environmentally conscious Nickel deposit. Cougar have until 31 October 2005 with a strong commitment to understanding the to decide whether to develop the prospect. Admiralty environment and impact of our activities. We seek Resources can receive up to $100,000 if this option development through responsible activities and is exercised as well as substantial ongoing royalty community safety. income from mining revenues. Bulman - Northern Territory Individual & Consolidated Financial Projections Negotiations are progressing with the Traditional Land Owners at Bulman through the Northern Land Our business consists of fi ve separate projects Council, to procure further exploration rights. An based in Australia and South America. The Directors ongoing work program on Admiralty Resources’ have decided to focus the company’s efforts on the granted mining leases encourages the Board to development of its two major mining interests in continue the formal process of acquiring these Chile (Sociedad Contractual Minera Santa Barbara additional rights so as to determine the extent joint venture) and Argentina (Rincon Salar). The of the Zinc and Lead resource. It is expected that projections for these major mining interests and exploration work will continue after the wet season their impact on the company’s revenue is contained in April 2006. and setout in the fi nancial projections following. Nilnav Orthopaedics Key points on consolidated projections Admiralty Resources has acquired a 10% interest • Net cash fl ow surplus for six month period in the Nilnav Orthopaedics companies which offer ending December 2007 - US$17.4 million and a a revolutionary, surgical technique and patented further US$17.4 million by June 2008. toolset for minimally invasive, “one cut” incision hip replacements. • Consolidated fi gures reveal that capital expenditure is recouped by December 2008. Nilnav has entered into an agreement with the NeuMedix Group to globally commercialise this • Commodity prices adopted for key resources are technology and technique. conservative and below current world prices. • Current world price for Lithium Chloride is Environmental Care US$4,200 per tonne however, US$3,000 per tonne has been adopted. Admiralty Resources are committed to environmental protection. We take a responsible • The sensitivity analysis reveals that in the event approach to environmental management and of a fall in current world commodity prices of up follow all government regulations. Internal policies to 65%, Admiralty Resources will be in a break and procedures are in place to safeguard our even operating cash fl ow position. environment and the community. Projects undergo detailed environmental analysis. We determine the level of impact from our activities and assess the viability of progressing exploration and mining projects. Risk management processes 62 Admiralty Resources NL 2005 Annual Report Funding • Balance of peak funding requirements of US$15.2 million due by December 2007 will be • Consolidated projected funding requirements sourced through traditional Institutional debt will peak at US$40.2 million in June 2007 funding. • Committed funding available totalling US$25 • Institutional debt funding discussions / PLOOLRQWR)HEUXDU\KDVEHHQVRXUFHG negotiations for balance of US$15.2 million are as follows: being conducted with the Directors anticipating &RQYHUWLQJ 1RWH QG WUDQFKH GXH )HEUXDU\ a favourable outcome by December 2006. This 2007 - A$10 million ÀQDQFLDO RXWFRPH LV EDVHG RQ SURMHFWLRQV WR 30 June 2006 and 31 December 2006 -Conversion of Share Options on issue respectively that the Santa Barbara Iron A$17.5 million of which A$8.75 million to be Ore Mine and three of the Rincon Salar’s key converted before 30 December 2005 resources will be fully operational producing VXUSOXVFDVKÁRZV -Loan Perolin Investments - limit A$6 million available now Chile’s Iron Ore Market tonnes of lump Iron Ore each year for their steel factory in Huachipato Chile. ,Q WKH ODWH ·V WKURXJK WR WKH ·V WKH )DUNDV IDPLO\ were a dominant player in the Chilean iron ore mining industry. The Los Colorados mines are located 25km north of Sociedad 7KH)DUNDVIDPLO\JURXSRIFRPSDQLHVLQFOXGHG0LQHUD6DQWD Contractual Minera Santa Barbara’s Japonesa mines. It is the %DUEDUD 0LQHUD 6DQWD )H 0LQHUD &RQIDU 0LQHUD 0HWDOPLQH largest mine in Chile taking over 6.2 million tonnes a year of Iron 0LQHUD '$1 0LQHUD 3DLWDQDV 0LQHUD +XDVFR DQG 0LQHUD Ore each year. Escondida. The group sold over 5 million tonnes of Iron Ore per \HDUGXULQJ PLOOLRQWRQQHVSHU\HDUIURP The Algarrobo mines are located 13km from Sociedad 1970 and 1 million tonnes per year from 1970-1977. Contractual Minera Santa Barbara’s mines at Japonesa and was previously the largest mine in Chile taking more than 5 million 7RGD\WKHUHLVRQHRSHUDWLRQDOPLQLQJFRPSDQ\LQ&KLOH²&$3 tonnes each year for over 50 years. Last year they reopened (see www.cap.cl and www.cmp.cl). CAP’s subdivision CMP in a DQGWRRNRYHUPLOOLRQWRQQHVRILURQRUHÀQHVDQGPLOOLRQ MRLQWYHQWXUHZLWK0LWVXELVKLRSHUDWHPLQHVLQ/RV&RORUDGRV tones of lump iron ore. 5RPHUDO$OJDUURERDQG(O7RIR The El Tofo mines were established in the 1900’s and are the The Romeral mines are located 180km south of Sociedad oldest iron ore mines in Chile. Having remained closed since Contractual Minera Santa Barbara’s Japonesa mines. They take WKH ·VODVW\HDUWKHVHPLQHVZHUHUHRSHQHGDQGWRRN PLOOLRQ WRQQHV RI ,URQ 2UH ÀQHVHDFK\HDU DQG PLOOLRQ PLOOLRQWRQQHVRIÀQHV7KLV\HDUVDZWKHPLQHWDNHDQRWKHU PLOOLRQWRQQHVRIÀQHV. Admiralty Resources NL 2005 Annual Report 63 Rincon Salar - Argentina Projected Revenue Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Lithium Chloride Production tonnes 0 0 0 2,000 6,000 6,000 Revenue - price per tonne $3,000 $0 $0 $0 $6,000,000 $18,000,000 $18,000,000 Potassium Chloride Production tonnes 0 0 20,000 20,000 20,000 20,000 Revenue - price per tonne $130 $0 $0 $2,600,000 $2,600,000 $2,600,000 $2,600,000 Boric Acid Production tonnes 0 0 3,000 3,000 3,000 3,000 Revenue - price per tonne $370 $0 $0 $1,110,000 $1,110,000 $1,110,000 $1,110,000 Sodium Sulphate Production tonnes 006,000 6,000 6,000 6,000 Revenue - price per tonne $150 $0 $0 $900,000 $900,000 $900,000 $900,000 Projected Operating Expenses Lithium Chloride Expenses -$965,000 -$4,952,400 -$9,417,927 -$10,933,513 -$7,632,720 -$7,632,720 Net Earnings -$965,000 -$4,952,400 -$9,417,927 -$4,933,513 $10,367,280 $10,367,280 Potassium Chloride Expenses -$120,000 -$120,000 -$1,060,000 -$1,060,000 -$1,060,000 -$1,060,000 Net Earnings -$120,000 -$120,000 $1,540,000 $1,540,000 $1,540,000 $1,540,000 Boric Acid Expenses -$137,800 -$137,800 -$854,800 -$854,800 -$854,800 -$854,800 Net Earnings -$137,800 -$137,800 $255,200 $255,200 $255,200 $255,200 Sodium Sulphate Expenses -$117,000 -$117,000 -$622,980 -$622,980 -$622,980 -$622,980 Net Earnings -$117,000 -$117,000 $277,020 $277,020 $277,020 $277,020 Capital Expenditure Lithium Chloride Capital Costs -$2,316,560 -$5,270,000 -$7,845,000 -$10,820,000 $0 $0 Cash Flow (revenue-capex-opex) -$3,281,560 -$10,222,400 -$17,262,927 -$15,753,513 $10,367,280 $10,367,280 Cumulative Cash Flow -$3,281,560 -$13,503,960 -$30,766,887 -$46,520,400 -$36,153,120 -$25,785,839 Potassium Chloride Capital Costs -$600,000 -$500,000 $0 $0 $0 $0 Cash Flow (revenue-capex-opex) -$720,000 -$620,000 $1,540,000 $1,540,000 $1,540,000 $1,540,000 Cumulative Cash Flow -$720,000 -$1,340,000 $200,000 $1,740,000 $3,280,000 $4,820,000 Boric Acid Capital Costs -$1,099,000 -$2,166,000 $0 $0 $0 $0 Cash Flow (revenue-capex-opex) -$1,236,800 -$2,303,800 $255,200 $255,200 $255,200 $255,200 Cumulative Cash Flow -$1,236,800 -$3,540,600 -$3,285,400 -$3,030,200 -$2,775,000 -$2,519,800 Sodium Sulphate Capital Costs -$933,000 -$2,055,000$0$0$0$0 Cash Flow (revenue-capex-opex) -$1,050,000 -$2,172,000 $277,020 $277,020 $277,020 $277,020 Cumulative Cash Flow -$1,050,000 -$3,222,000 -$2,944,980 -$2,667,960 -$2,390,940 -$2,113,920 Combined Cash requirements and maximum exposure Lithium Chloride -3,281,560 -10,222,400 -17,262,927 -15,753,513 10,367,280 10,367,280 Potassium Chloride -720,000 -620,000 1,540,000 1,540,000 1,540,000 1,540,000 Boric Acid -1,236,800 -2,303,800 255,200 255,200 255,200 255,200 Sodium Sulphate -1,050,000 -2,172,000 277,020 277,020 277,020 277,020 Six Monthly Total Position -6,288,360 -15,318,200 -15,190,707 -13,681,293 12,439,500 12,439,500 Cumulative Cash Position -6,288,360 -21,606,560 -36,797,267 -50,478,560 -38,039,060 -25,599,559 64 Admiralty Resources NL 2005 Annual Report Sociedad Contractual Minera Santa Barbara Iron Ore Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Projected Revenue Production tonnes 0 500,000 500,000 500,000 500,000 500,000 Revenue - price per $38 $0 $19,000,000 $19,000,000 $19,000,000 $19,000,000 $19,000,000 tonne Projected Operating Expenses Expenses -$712,000 -$9,162,000 -$9,050,000 -$9,050,000 -$9,050,000 -$9,050,000 Net Earnings -$712,000 $9,838,000 $9,950,000 $9,950,000 $9,950,000 $9,950,000 Capital Expenditure Capital Costs -$8,200,000 -$500,000 -$1,300,000 $0 $0 $0 Cash Flow (revenue-capex- -$8,912,000 $9,338,000 $8,650,000 $9,950,000 $9,950,000 $9,950,000 opex) Cumulative Cash -$8,912,000 $426,000 $9,076,000 $19,026,000 $28,976,000 $38,926,000 Flow Joint Venture Agreement - Priority of Distribution Repay ADY -$8,912,000 Repay ADY -$500,000 -$1,300,000 50/50 Distribution of balance from net earnings after repayment to ADY c/f loan balance -$74,000 $0 $0 $0 Loan Repayments $9,338,000 $1,300,000 $0 $0 $0 Distribution from $0 $0 $3,638,000 $4,975,000 $4,975,000 $4,975,000 CMSB Last Acquisition -$3,500,000 payment Total Received $5,838,000 $4,864,000 $4,975,000 $4,975,000 $4,975,000 by ADY Rincon Salar & Santa Barbara Consolidated Cashfl ow and Exposure Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Argentina -$6,288,360 -$15,318,200 -$15,190,707 -$13,681,293 $12,439,500 $12,439,500 Sociedad Contractual Minera Santa Barbara -$8,912,000 $9,338,000 $4,864,000 $4,975,000 $4,975,000 $4,975,000 Total -$15,200,360 -$5,980,200 -$10,326,707 -$8,706,293 $17,414,500 $17,414,500 Cumulative Total -$15,200,360 -$21,180,560 -$31,507,267 -$40,213,560 -$22,799,060 -$5,384,559 Admiralty Resources NL 2005 Annual Report 65 Sociedad Contractual Minera Santa Barbara Iron Ore Project - Chile History stockpiles and in situ ore. In situ ore is present as both alluvial ore that is extracted from the surface Admiralty Resources NL has acquired a 49% interest to a depth of 20 metres and from veins in the main LQ 6RFLHGDG &RQWUDFWXDO 0LQHUD 6DQWD %DUEDUD D dioritic ore bodies which outcrop and have been FRPSDQ\IRUPHGLQ1RYHPEHUWRH[SORLWWKH drilled to a depth of 45 metres. iron ore resources located near Vallenar in Chile. Sociedad Contractual Minera Santa Barbara owns ,URQRUHÀQHVVWRFNSLOHV and will operate nine existing iron ore mine sites We intend to process the 2.2 million tonne stockpile FRQWDLQLQJDOOXYLDO KDUG URFN YHLQ DQG VWRFNSLOHG RILURQRUHÀQHVDWWKH-DSRQHVDWHQHPHQW:HZLOO LURQRUHÀQHV also process the 0.8 million tonne stockpile of iron The Resource RUHÀQHVDWWKH0LUDGRUWHQHPHQW This involves less capital expenditure as the activity Geographical Location RI H[WUDFWLRQ LV FRPSOHWHG ,Q HVVHQFH RQO\ WKH The Sociedad Contractual Minera Santa Barbara PRYHPHQWRIWKHRUHÀQHVWRWKHSURFHVVLQJSODQWLV mines are located in Northern Chile seven kilometres UHTXLUHG6HHÀJXUH VRXWKZHVWRI9DOOHQDU SRSXODWLRQ DQG 2. In situ iron ore - Alluvial and Hard Rock kilometres from the commercial port of Huasco Bay. The mines cover an area in excess of 19 square The extraction and processing of the hard rock and kilometers. alluvial iron ore deposits involves open cut earth H[FDYDWLRQSURFHVVHVEHIRUHWKHRUHLVSURFHVVHG The nine mines have a resource of at least 41 million LQVHSDUDWRUV6HHÀJXUH WRQQHV RI LURQ RUH ZLWK DQ )H FRQWHQW DYHUDJLQJ between 60% and 67%. Several mine sites were Financial Forecast operational and productive until the early 1970s FXUUHQWO\ PLOOLRQ WRQQHV RI LURQ RUH ÀQHV DUH • Current market purchase price per tonne for stockpiled at the Japonesa site and a further 0.8 OLWKLXPFKORULGHH[FHHGV86SHUWRQQH million tonnes at Mirador. KRZHYHUDÀJXUHRI86SHUWRQQHKDVEHHQ adopted by the company in the demonstration .H\UHVRXUFHVWREHH[WUDFWHGLQFOXGH of the above projected income. Iron Ore (80% magnetite and 20% hematite) • The projected income includes a reduction of The extraction Process IRU FRUSRUDWH RYHUKHDGV PDUNHWLQJ DQG selling expenses. ,QWKHSDVWRUHKDGEHHQSURFHVVHGWRH[WUDFWOXPS LQSUHIHUHQFHWRWKHÀQHVZKLFKKDGEHHQOHIWEHKLQG • The project components to be funded over a as buyers in the late seventies were only interested SHULRGRIPRQWKVLQRUGHUWRH[WUDFW LQ OXPS 7KHUHIRUH WKH ÀQHV ZHUH VWRFNSLOHG QHDU tonnes of lithium chloride are detailed on page WKH SK\VLFDO DQG PDJQHWLF VHSDUDWRUV 1RZ WKHUH 68. The capital items are consistent with mining LVDGHPDQGIRULURQRUHÀQHV7KHUHDUHQRZWZR and engineering costings. VRXUFHV RI RUH WR EH SURFHVVHG WKH LURQ RUH ÀQH 66 Admiralty Resources NL 2005 Annual Report )LJXUH([WUDFWLRQSURFHVVIRUPLOOLRQWRQQHVWRFNSLOHVDW-DSRQHVDDQG0LUDGRU $ 7ZRÀQHVVWRFNSLOHVH[LVWZKLFKZLOOEHPRYHGE\IURQWHQGORDGHUV (C) The separated iron ore will be loaded onto trucks and transported to WR WKH LURQ RUH VHSDUDWLQJ SODQW VLWXDWHG ZLWKLQ PHWHUV RI WKH +XDVFRVHDSRUWVRPHNLORPHWUHVIURPWKH9DOOHQDUPLQHV stockpiles. ' 7KHLURQRUHZLOOEHVWRFNSLOHGDW+XDVFRSRUWZLWKLQPHWUHVRI % 7KHVHSDUDWRUSODQWZLOOVHSDUDWHÀQHVZLWKWKHUHTXLVLWHOHYHORILURQ the ship loading facility. ore and position the iron ore ready for transport. The plant will be SRZHUHG E\ GLHVHO IXHO DOWKRXJK KLJK YROWDJH HOHFWULFLW\ OLQHV UXQ ( 7KHVKLSVZLOOEHORDGHGDW+XDVFRXVLQJWKHSRUWORDGLQJIDFLOLW\DQG 1km from the stockpiles. (Electricity is an option to be used in due travel to their destination. (The loading of the ships will take between course). 2 and 3 days). )LJXUH([WUDFWLRQSURFHVVIRU,URQ2UHWREHPLQHGDWQLQHVLWHV (A) Extraction of the iron ore. It is anticipated that minimal overburden (D) The iron ore will be transported by road to Huasco. will be encountered in extracting at least 12 million tonnes of iron ore. (E) The iron ore will be stockpiled at Huasco within 750 metres of the sea port loading facility. (B) The iron ore will be crushed on site. ) 7KHLURQRUHZLOOEHWUDQVIHUUHGWRWKHVKLSDWSRUW WKLVORDGLQJZLOO & 7KHFUXVKHGLURQRUHZLOOEHVHSDUDWHGWKHZDVWHOHIWDQGUHWXUQHG take from 2 to 3 days) to the extraction pit. The iron ore is collected and positioned ready for transport. Admiralty Resources NL 2005 Annual Report 67 Dec-05 -XQ 'HF-XQDec-07 -XQ Iron Ore Revenue Production tonnes Sales - price per tonne 38 - Capital Costs *HRORJLVWV*UDYLPHWULFV0DJQHWLFV Travel and accommodation (QJLQHHULQJ )HDVLELOLW\ Sales & Administration Mining tenement fees Mine survey & Topographic Legal & Survey fees Drilling - JORC and Other Sample analysis and Reporting 3ODQW)RXQGDWLRQV Port facility Electricity Connection Services Water Supply Mine site roads Site Admin Buildings and Security Mine Site excavation Surveying 2IÀFH&RPSXWHUV,7 Maintenance building Primary Grizzly Crusher Secondary Crushers Magnetic Separator HSD 800 t/hr Conveyor belts Hoppers and loaders Laboratories (2 - mine and port) Maintenance -spares Construction Working capital Contingencies Sub Total 500,000 Fixed Costs 5HQWRIÀFHV9DOOHQDU6DQWLDJR Accounting and Audit Interest to Admiralty Resources - - - - 'LUHFWRUV)HHV &HQWUDO%DQN)HHV - - - - - Tenement lease Labour & wages - Santiago Vallenar Management Salaries Motor vehicles Administration & Sales Legal costs Other variable costs Sub Total Variable Costs Per tonne Plant Operation2.00 - Trucking to Huasco Port 2.50 - Port Loading6.80 - Electrical power 0.10 - Diesel fuel 0.35 - Royalties 0.50 - Repairs and Maintenance 0.15 - Mining Royalties 1.50 - Sales Marketing Costs 1.00 - Sub Total - 7,450,000 7,450,000 7,450,000 7,450,000 7,450,000 &DVKÁRZ ([FOXGLQJ&DSLWDO&RVWV 9,950,000 9,950,000 9,950,000 9,950,000 &XPXODWLYH&DVKÁRZ ([FOXGLQJ&DSLWDO&RVWV 68 Admiralty Resources NL 2005 Annual Report Markets The Sociedad Contractual Minera Santa Barbara LURQSURMHFWLVIRFXVHGRQSURGXFLQJLURQRUHÀQHV The market for iron ore product is made up of three PDLQDUHDVWKHVHLQFOXGH .RUHD -DSDQ DQG WKH (8 DUH WKH PDMRU EX\HUV RI iron ore. Demand in China is growing at 25% per • lumps - greater than 35mm in size annum. • ÀQHVOHVVWKDQPPLQVL]H DQG • pellets - approx. the size of a pea but FRQFHQWUDWHGWR )H Global raw steel consumption (Kg/Person) Country 2002 2003 2004e 2005f YOY 6RXWK.RUHD 953 985 975 996 2% Japan 571 603 603 604 0% EU 403 404 431 441 2% Nth America 328 293 444 457 3% Russia 194 186 315 332 5% China 159 198 202 219 8% India 32 3330326% )RUHFDVWE\&RPHWDOV,QF In 2004 the top six iron ore importers in China were &0,(& -LJDQJ 6KRXJDQJ DQG 0DJDQJ ZLWK Baosteel with 28.3 million tonnes of which Australia million tonnes of which Australia supplied 3 million VXSSOLHG PLOOLRQ WRQQHV 1H[W ZHUH :XJXQJ tonnes. China’s Iron Ore demand forecast 2004 2005 2006 Pig iron Capacity 264 298 343 Total Demand for iron ore 391 441 508 Maximum Domestic Iron Ore Supply 183 190 200 Maximum Imported Iron ore Supply 190 220 250 Maximum Total Iron Ore Supply 373 410 450 Shortage (18) (39) (58) Actual Pig iron Production 240 270 302 (VWLPDWHVSURYLGHGE\&,6$%DVHGRQDVVXPSWLRQWKDWDOOZRUOGLQFUHDVHLQLURQRUHSURGXFWLRQWREHVXSSOLHGE\&KLQDDQGSURGXFWLRQRI07SLJLURQQHHGV 1.48MT iron ore. %+3%LOOLWRQ&95'DQG5LR7LQWRDUHWKHWKUHHODUJHVW 0W1HZPDQ+LJK*UDGH)LQHV86FHQWVSHU iron ore exporters in the world. CVRD are furthest dry metric tonne unit; an increase of 71.5 per cent. IURPWKH&KLQHVHPDUNHWVLQ%UD]LO)UHLJKWFRVWVDUH 7KLV SXWV WKH HTXLYDOHQW ÀQHV SULFH DW )H DW less for Chilean exporters by about USD$6-$8 per 86'WRQQH)2%-DSDQFRQWLQXHVWREH%+3 tonne. %LOOLWRQ,URQ2UH·VELJJHVWFXVWRPHUEX\LQJSHU FHQWRILWVSURGXFWVIROORZHGE\&KLQD .RUHD 7RHVWLPDWHWKH)2%SULFHIRU&DUDMDV/XPSDW (17%) Australia (9%) and Taiwan (7%). )HWKHIRUPXODLV FHQWV[ 86' SHU dry metric tonne. The maximum moisture content is ,QWKHSULFHRI0W1HZPDQ+LJK*UDGH/XPS 8%. was 45.93 US cents per dry metric tonne unit; an increase of 18.62 per cent. Mt Newman High Grade On the 13 April 2005 BHP Billiton announced it )LQHVZDV 86FHQWVSHUGU\PHWULFWRQQH DQ had reached agreement with a number of its steel increase of 18.62 per cent. customers on prices for contracted iron ore tonnage for the 2005 contract year. The agreed prices for Admiralty Resources NL 2005 Annual Report 69 Rincon Salar Lithium, Borate and other minerals - Argentina History .H\UHVRXUFHVWREHH[WUDFWHGDUH 7KH ÀUVW JHRORJLFDO LQYHVWLJDWLRQV ZHUH SHUIRUPHG • Lithium chloride E\ /XFLDQR &DWDODQR LQ ZKR LGHQWLÀHG LWV • Potassium chloride potential as a source of common salt and possibly boron salts. • Sodium sulphate The initial study on the Rincon Salar was conducted in • Boric acid and borates 1977 by Dr Pablo Hazderiga a geological consultant with UNIDO. Financial Forecast $IWHUJRYHUQPHQWLQLWLDWLYHVH[SORUDWLRQFRPPHQFHG • Current market purchase price per tonne for IURP WR DQHZLQWHUSUHWLYHVWXG\ZDV OLWKLXPFKORULGHH[FHHGV86SHUWRQQH SXEOLVKHGE\,JDU]DEDODQG)HUUHWWLERWKDFDGHPLFV KRZHYHU D ÀJXUH RI 86 SHU WRQQH RIWKH8QLYHUVLW\RI6DOWD$UJHQWLQD7KLVZRUNZDV has been adopted by the company in the essentially completed in 1989. demonstration of the above projected income. $V DUHVXOWRIH[WHQVLYH H[SORUDWLRQ JHRORJLFDO • The projected income includes a reduction of DQG FKHPLFDO ZRUN WKH 5LQFRQ 6DODU FDQ QRZ EH IRU FRUSRUDWH RYHUKHDGV PDUNHWLQJ DQG FRQVLGHUHG D ZRUOG FODVV UHVRXUFH ULFK LQ OLWKLXP selling expenses. SRWDVVLXPVRGLXPDQGERUDWHV • Page 72-75 indicates capital items consistent The Resource with mining and engineering costings. The project components are required to be funded Geographical Location RYHUDSHULRGRIPRQWKVLQRUGHUWRH[WUDFW WRQQHV RI OLWKLXP FKORULGH VHH SDJH The Rincon Project is located in north-western 72). Argentina near the Chilean border. It is a hyper VDOLQHODNH EULQH HQULFKHG LQ OLWKLXP PDJQHVLXP SRWDVKDQGERURQ 7KHSURMHFWLVVLWXDWHGDWDQHOHYDWLRQRIPHWUHV within the Antofalla-Pocitos volcanic rift valley in the high Andean Plains. This ponded evaporate deposit is estimated to contain a recoverable brine tonnage of 1.45 billion tonnes within a closed basin area in excess of 250 square kilometres and to a depth of 60 metres. 70 Admiralty Resources NL 2005 Annual Report 7KH/LWKLXP([WUDFWLRQ3URFHVV 7KH H[WUDFWLRQ PHWKRG IRU WKH NH\ UHVRXUFHV KDV EHHQ ÀQDOLVHG DV WKHVDOWOHIWDWWKHERWWRPRIWKHÀUVWSRQGV7KHHYDSRUDWHGEULQH indicated above. The extraction process adopted has been developed is the crystallisation of a mixture of potassium chloride and sodium by the company after extensive research and advice from appropriate chloride salts that are harvested and transferred to a processing consultants and experts. SODQWZKHUHSRWDVVLXPFKORULGHLVUHSODFHGE\DJULQGLQJDQGÁRWDWLRQ process. (A) Pumps are positioned on the solid crusty surface of the salt lake. Special purpose pipes (with inlets every 10 metres) are sunk into the (D) The solution remains in the second evaporation pond for up to 100 salt lake. The salty solution is pumped to the surface (noting that the days for the purpose of further concentrating of the brine. production in depth is 20 metres). (E) The highly concentrated solution is pumped into the storage pond to % 7KHVDOW\VROXWLRQLVSXPSHGGLUHFWO\LQWRWKHÀUVWSRQG ZKLFKZLOO UHJXODWHWKHÁRZRIVROXWLRQWRWKHQH[WVWDJH be excavated into the salt lake’s crusty surface) and stored there for approximately 1 to 7 days. This is the “Primary Storage and Settling Pond”. ) 2QFH WKH VROXWLRQ LV SXPSHG LQWR WKH ´,RQLVDWLRQ DQG SURFHVVLQJ plant” the lithium is separated and concentrated to a commercial marketable grade solid salt compound. & 7KHVDOWULFKVROXWLRQLVWKHQSXPSHGWRWKHÀUVWHYDSRUDWLRQSRQGV The ponds will be lined with plastic liners to prevent solution leakage *, 7KHOLWKLXPSRWDVVLXPVRGLXPVXOSKDWHDQGERUDWHFRPSRXQGVZLOO through the pond base in the lake’s crust. The solution will remain be transported by road to the port of Antofagasta. in these ponds for approximately 250 days (dependent on weather conditions). The concentrated solution is then pumped into the second set of evaporation ponds. A front-end-loader then removes Admiralty Resources NL 2005 Annual Report 71 Lithium Chloride Dec-05 -XQ 'HF-XQDec-07 -XQ Lithium Chloride Revenue Production tonnes Sales - price per tonne - - - Capital Costs Consulting Engineers & Geologists Travel and accommodation Engineering Australia (QJLQHHULQJ )HDVLELOLW\ Environmental Report Mine survey & Topographic Legal & Geological fees Commissioning General costs - 3ODQW)RXQGDWLRQV ([FDYDWLRQGR]HUVEREFDWVWUXFNV Services Water Supply Electrical Services Gas Services Mine site roads Buildings and Security Evaporation and Crystallising ponds Pond membranes /RDGLQJ)DFLOLW\ 6WRUDJH)DFLOLW\ - - 2IÀFHDQG/DERUDWRU\&RPSXWHUV Mining camp Equipment and Machinery Processing Plant - - Construction Working capital - Contingencies Sub Total 5,270,000 - - Fixed Costs Interest and cost of capital 6% 6DOWD2IÀFHDQGZDUHKRXVH 0LQLQJ&DQRQWHQHPHQWIHHV Labour & wages Management Salaries Motor vehicles Administration & Orders Legal costs 2WKHUÀ[HGFRVWVLRQVXSSOLHVPDLQWHQDQFH Sub Total 4,952,400 Variable Costs Excavation and pumping 89.00 - - - salt handling 16.00 - - - Electrical power 74.54 - - - Consumables and disposable items 513.00 - - - Process fuel 27.00 - - - Bags and storage 88.00 - - - Repairs and Maintenance 13.00 - - - Mining Royalties 120.00 - - - )UHLJKWWR$QWRIDJXVWD3RUW&RQVXPHUV 220.00 - - - Sub Total - - - &DVKÁRZ &XPXODWLYH&DVKÁRZ 72 Admiralty Resources NL 2005 Annual Report Potassium Chloride Dec-05 -XQ 'HF-XQDec-07 -XQ Potassium Chloride Revenue Production tonnes Sales - price per tonne 150 - - Capital Costs Geologists Travel and accomodation (QJLQHHULQJ )HDVLELOLW\ Sales & Administration 0LQLQJ&DQRQWHQHPHQWIHHV - Mine survey & Topographic Legal & Geological fees - Commissioning - General costs - 3ODQW)RXQGDWLRQV Services Water Supply Electrical Services Gas Services Mine site roads Buildings and Security Evaporation and Crystallising ponds Boiler room - 2IÀFHDQG/DERUDWRU\ Mining camp Equipment and Machinery Construction Working capital Contingencies Sub Total 500,000 Fixed Costs Labour & wages Management Salaries Motor vehicles Administration & sales Legal costs Other variable costs Sub Total Variable Costs Mining 1.11 - - )UHLJKWPLQHWRSODQW 1.23 - - Mineral handling 1.10 - - Electrical power 1.20 - - Process fuel 1.30 - - Bags 1.25 - - Repairs and Maintenance1.20 - - Mining Royalties 0.61 - - )UHLJKWWR$QWRIDJXVWD3RUW&RQVXPHUV 38.00 - - Sub Total $47.00 - - 940,000 940,000 940,000 940,000 &DVKÁRZ &XPXODWLYHFDVKÁRZ 2,540,000 Admiralty Resources NL 2005 Annual Report 73 Sodium Sulphate Dec-05 -XQ 'HF-XQDec-07 -XQ Sodium Sulphate Revenue Production tonnes Sales - price per tonne 150 - - Capital Costs Geologists Travel and accomodation (QJLQHHULQJ )HDVLELOLW\ Sales & Administration Mine survey & Topographic Legal & Geological fees - Commissioning - General costs - Mine Acquisition 3ODQW)RXQGDWLRQV Services Water Supply Electrical Services Gas Services Mine site roads Buildings and Security Evaporation and Crystallising ponds Boiler room - 2IÀFHDQG/DERUDWRU\ Mining camp Equipment and Machinery Construction Working capital Contingencies Sub Total 2,055,000 Fixed Costs 0LQLQJ&DQRQWHQHPHQWIHHV Labour & wages Management Salaries Motor vehicles Administration & sales Legal costs Other variable costs Sub Total Variable Costs Mining 6.11 - - )UHLJKWPLQHWRSODQW 10.60 - - Mineral handling 5.10 - - Electrical power 3.60 - - Process fuel 8.45 - - Bags & centrifuge bags 4.60 - - Repairs and Maintenance5.76 - - other variable costs1.50 - - Mining Royalties 0.61 - - )UHLJKWWR$QWRIDJXVWD3RUW&RQVXPHUV 38.00 - - Sub Total - - &DVKÁRZ 277,020 277,020 277,020 277,020 &XPXODWLYH&DVKÁRZ 74 Admiralty Resources NL 2005 Annual Report Boric Acid Dec-05 -XQ 'HF-XQDec-07 -XQ Boric Acid Revenue Production tonnes Sales - price per tonne 370 - - Capital Costs Geologists Travel and accomodation (QJLQHHULQJ )HDVLELOLW\ Sales & Administration Mine survey & Topographic Legal & Geological fees Commissioning General costs Mine Acquisition 3ODQW)RXQGDWLRQV Services Water Supply Electrical Services Gas Services Mine site roads Buildings and Security Boiler room 2IÀFHDQG/DERUDWRU\ Equipment and Machinery Construction Working capital Contingencies Sub Total Fixed Costs 0LQLQJ&DQRQWHQHPHQWIHHV Labour & wages Management Salaries 0RWRUYHKLFOHVWUXFNVEREFDW Administration & sales Legal costs Other variable costs Sub Total Variable Costs Mining 48.00 - - Hydrochloric Acid 112.00 - - )UHLJKWPLQHWRSODQW 11.00 - - Electrical power 6.60 - - Process fuel 5.70 - - Bags & centrifuge bags 11.00 - - Repairs and Maintenance5.50 - - Other variable costs0.50 - - Mining Royalties 0.70 - - )UHLJKWWR$QWRIDJXVWD3RUW&RQVXPHUV 38.00 - - Sub Total - - 597,500 597,500 597,500 597,500 &DVKÁRZ &XPXODWLYH&DVKÁRZ Admiralty Resources NL 2005 Annual Report 75 Markets :RUOGFRQVXPSWLRQRIOLWKLXPLVGLIÀFXOWWRHVWLPDWH EXW LW FRXOG EH DV KLJK DV WRQQHV RI Lithium Compounds Lithium Carbonate equivalent. The world’s largest SURGXFHU IURP EULQHV SURGXFHV DURXQG The manufacturers of lithium compounds from WRQQHVRIOLWKLXPFDUERQDWH6LJQLÀFDQWHQGSURGXFW brines are dominating the supply to market due to PDQXIDFWXUHUV DUH ORFDWHG LQ 86$ &KLQD .RUHD their cheaper production costs compared to the -DSDQDQG*HUPDQ\ costs associated with the extraction process from pegmatite (spodumene) rocks. Lithium batteries and Lithium Ion battery Markets Lithium compounds which are usually derived from OLWKLXP FDUERQDWH OLWKLXP K\GUR[LGH RU OLWKLXP The difference between Lithium batteries and chloride are used in a wide range of ceramics and Lithium-ion (Li-ion) batteries is that most Lithium JODVV SULPDU\ DOXPLQLXP SURGXFWLRQ OXEULFDQWV batteries are not rechargeable but Li-ion batteries JUHDVHVEXLOGLQJPDWHULDODQGFRQFUHWHDSSOLFDWLRQV DUH UHFKDUJHDEOH )URP DFKHPLFDOVWDQGSRLQW WH[WLOHV URFNHW SURSHOODQWV FRQWLQXRXV FDVWLQJ Lithium batteries use lithium in it’s pure metallic SRZGHUV DLU FRQGLWLRQLQJ VLOYHU VROGHU EDWWHULHV form. Li-ion batteries use lithium compounds which and medicine manufacturing. are much more stable than the elemental lithium used in lithium batteries. Lithium-ion batteries are Lithium chloride is one of the most hygroscopic designed to be recharged hundreds of times. Lithium VROXEOH PDWHULDOVNQRZQDQGLWDVZHOODVOLWKLXP polymer batteries employ a new gel-type electrolyte EURPLGHDUHXVHGLQDLUFRQGLWLRQLQJDQGLQGXVWULDO to provide power to the most demanding application drying systems. in the handheld device world. Lithium stearate is used as an all-purpose and high- Business Communications Study reports in its 2004 temperature lubricant. Other lithium compounds study of the lithium battery market in the USA that are used in dry cells and storage batteries. the rechargeable secondary lithium battery market Lithium carbide is used for the treatment of bipolar ZDV DSSUR[LPDWHO\ 86 PLOOLRQ LQ EXW disease and other mental illness conditions. should grow to more than US$2.1 billion by 2009. The major market for lithium compounds is the USA China and Taiwan are the largest producers of IROORZHGE\&KLQD7DLZDQDQG-DSDQWKHQ(XURSH lithium ion batteries. The most promising application There are over 80 different lithium compounds being LV LQ WKH XVH RI FDUV &(2 /LQGR +R WROG 061%& sold. These include lithium compounds like butyl FRP LQ 6HSWHPEHU WKDW WKH EDWWHU\ PDNHU OLWKLXP RUJDQROLWKLXP FRPSRXQGV DQG LQRUJDQLF 7KXQGHU6N\ KDG FDXJKW WKH DWWHQWLRQ RI D )UHQFK Lithium salts. There are hundreds of manufacturers FDUPDNHU /LWKLXP LRQ EDWWHULHV +R DGGHG EUHDN consuming lithium chloride and lithium carbonate ´WKHERWWOHQHFNµWKDWKDGSODJXHGHOHFWULFYHKLFOHV producing these lithium compounds. noting that ThunderSky’s bus has a range of 180 miles and a recharge time of just three hours. The The 2005 US geological Survey reports that “The company has also developed an electric scooter United States remained the leading consumer of ZLWKD PLOHUDQJHPSKWRSVSHHGDQGD lithium minerals and compounds and the leading PLQXWHUHFKDUJHWLPHVKHVDLG3ODQVDUHWRSDUWQHU producer of value-added lithium materials”. ZLWKDVFRRWHUPDNHUDQGVHOOLWIRUDURXQG As only one company produced lithium compounds Future Applications IURPGRPHVWLFUHVRXUFHVUHSRUWHGSURGXFWLRQDQG value of production data cannot be published. The most interesting applications that will require large amounts of lithium compounds being developed 7KH XVH RI OLWKLXP FRPSRXQGV LQ FHUDPLFV JODVV are the use of lithium metals in cars to make them and primary aluminium production represented more OLJKWHUHQHUJ\SURGXFWLRQDQGLQSKDUPDFHXWLFDOV than 60% of estimated domestic consumption. Other major end uses for lithium were in the manufacture RI OXEULFDQWV DQG JUHDVHV SULPDU\ DQG VHFRQGDU\ UHFKDUJHDEOH EDWWHULHV DQG LQ WKH SURGXFWLRQ RI synthetic rubber. 76 Admiralty Resources NL 2005 Annual Report Geological Reserves Summary %DQGHGZHDWKHUHGIRUPDWLRQVQHDU2ODUR]$UJHQWLQD Chile Genesis The Japonesa Group iron ore deposits consists of 7KH &,% DQGHVLWLF KRVWURFNV DUH ULFK LQ )H2 WRW QLQH PLQHV RI ZKLFK VHYHQ DUH ORFDWHG FORVH WR ² ZW 0HQDUG DQG WKH PDLQ each other in the foothills about 5 kilometres from mineralogy includes labradorite and augite-diopside. the township of Vallenar which is 55 kilometres from The major part of the primary iron is in the form of the coast. The other two are 5 kms to the south 7LPDJQHWLWH ZKLFKZDVODWHU SDUWO\ UHPRELOL]HG east. during mineralization and deposited as Ti-poor hydrothermal magnetite (Ruiz et al. 1965; Menard The mines are situated in the iron ore belt that 7KHPLQHUDOL]DWLRQ %RRNVWURP 2\DU]XQ GRPLQDWHV WKH JHRORJ\ LQ QRUWKHUQ &KLOH LH WKH DQG )UXWRV 3LQFKHLUD 0HQDUG $WDFDPD)DXOW=RQHZKLFKIRUPHGDNPORQJ 0HQDUG DPRQJRWKHUV FRQVLVWVRIYHLQVDQG EHOW RI .LUXQDW\SH LURQ GHSRVLWV ZLWK UHVHUYHV RI YHLQOHWVRIPDJQHWLWHEUHFFLDVGLVVHPLQDWLRQVDQG 0W )H 7KH&KLOH,URQ%HOWIRUPVDORQJ massive replacements of the andesites by magnetite and narrow North–South trending belt along the ore. The mineral paragenesis includes magnetite FRDVWDO UDQJH DQG WKH ODUJHVW GHSRVLWV %RTXHUR WUHPROLWHDSDWLWHIROORZHGE\DOELWHROLJRFODVH Q &KDQDU /RV &RORUDGRV (O $OJDUURER &ULVWDOHV ± clinozoisite ± chlorite ± sphene ± scapolite ± (O 5RPHUDO DUH ORFDWHG EHWZHHQ ²o S. Their WRXUPDOLQHS\ULWHDQGS\URSK\OOLWH$FFRUGLQJWR reserves (before mining) are in the order of 200– 0HQDUG WKH K\GURWKHUPDO V\VWHP HYROYHG 0W )H HDFK XQGHU KLJK R[\JHQ IXJDFLW\ KLJK ZDWHU SUHVVXUH 7KH ÀUVW PLQH WR EH H[SORLWHG E\ 6&06% LV WKH and high temperature. Iron was leached from the -DSRQHVDPLQHZKLFKLVDGMDFHQWWRWKHLURQRUHÀQH KRVWURFN WUDQVSRUWHGDV)H&O DQGGHSRVLWHGDV VWRFNSLOHV0HWDOLFD&RQVXOWRUHVDVSHFLDOLVWJURXS )H2 of geological and mining engineers have developed and presented this non-JORC reserve estimate to Argentina the board of SCMSB. There are more than 52 salt lakes or salars in the Japonesa Iron Ore Mine, Chile Puna region near the Andes in northern Argentina. 6DODUGHO5LQFyQLVDWHFWRQLFGUDLQDJHEDVLQÀOOHG (VWLPDWHVE\0HWDOOLFD&RQVXOWRUHV-XO\ with clastic sedimentary material and evaporites which are fringed with detrital material from the Fe Range Volume Density Tonnes margins. Unconsolidated clastic sediments have % M3 accumulated as erosion products of the bedrock and LPSRUWDQWDPRXQWVRIVDOLQHPLQHUDOVSUHGRPLQDQWO\ 10-15 2.24 RI YROFDQLF RULJLQ KDYH DFFXPXODWHG LQ WKH VDODU 15-20 2.61 LWVHOI GXULQJ PLGODWH 7HUWLDU\ DQG 4XDWHUQDU\ 7KH 20 Plus 2.93 JHRPRUSKRORJ\RIWKH6DODULVLQÁXHQFHGE\VHYHUDO IDFWRUV VXFK DV FOLPDWH FKDQJHV HYDSRUDWLRQ Total 13,185,07031,266,822UDLQIDOO LQÁRZV RI VXUIDFH DQG XQGHUJURXQG Note: The reserves of the other eight mines will be computed once drilling ZDWHUVWKHUPDOVSULQJVHWFZKLFKKDYHJLYHQULVH has concluded. Admiralty Resources NL 2005 Annual Report 77 WR GLIIHUHQW ]RQHV FKDUDFWHUL]HG E\ LWV SK\VLFDO To the south of the Salar there are mountains of VWUXFWXUHFKHPLFDODQGPLQHUDORJLFDOFRPSRVLWLRQ DQGHVLWLF YROFDQLF RULJLQ H[FHHGLQJ PHWUHV &HUURV7XWXO GHO 0HGLR \ 3RFLWRV 7R WKH QRUWKHUQ Salar del Rincón occupies about a quarter (some DQG ZHVWHUQ PDUJLQV DVKÁRZV WXIIV DQGHVLWLF NP RILWVGUDLQDJHEDVLQ VRPHNP lavas and ignimbrites were generated during late being the evaporitic salt deposit located over the 7HUWLDU\DQG4XDWHUQDU\IURPWKHYROFDQLFDFWLYLW\RI southern half of the playa lake and covering an area &HUUR5LQFyQ PKLJK ORFDWHGDWWKH&KLOH of about 260 km2. The salt body or evaporitic salar Argentina border. The eastern margin of the Salar nucleus consists predominantly of halite fringed by fringes Sierra de Guayaos range where Paleozoic and VXOIDWH IDFLHV LQFOXGLQJ J\SVXP DQG WKHQDUGLWH Tertiary rocks were formed. Along the eastern and at the eastern and western margins. The phreatic ZHVWHUQPDUJLQDOEHDFKHVRIWKH6DODUSODWIRUPVRI brine level is at a depth of ~50 cm. The relatively travertine (CaCO3) have been developed by bacterial FRQVWDQWEULQHOHYHODQGODFNRIÁRRGLQJLQWKHVDOW and/or hydrothermal processes. Where the Rio body indicates equilibrium between recharge and Catua as well as Huaytiquina and Rincón streams HYDSRUDWLRQLQWKHVDODUZKLFKWDNHVSODFHWKURXJK DUHGUDLQLQJWRWKH6DODUWKHLJQLPEULWHVDUHFRYHUHG the crystalline salt crust as well as pools and streams E\ODUJHGHWULWDOSODWIRUPVRIWKH4XDWHUQDU\ in the marginal zones. Rincon Salar – JORC Estimate Brine tonnage, Mt Inferred Resources Lithium Potassium Magnesium Drilled area 214 *UDGHPJ/ 332 Contained W 1.3 Mt 0.5 Mt Remainder of tenements 548 *UDGHPJ/ 332 6300 2700 Contained W 3.4 Mt 1.4 Mt Total Inferred 762Contained250,000 t 4.7 Mt 1.9 Mt Note: Lithium and potassium are the two elements that will be extracted. Rapè - Ulexite Mean Grade, Volume Tonnage thickness expressed as Contained mineral m3 t cm B2O3 as B2O3 as H3BO3 t t Measured Mineral 33 18.5% Resource Indicated Mineral 96 15.7% Resource Inferred Mineral 35 12.0% Resource Mineral Resources Total 598,050 837,000 129,800 230,600 78 Admiralty Resources NL 2005 Annual Report Three major types of saline crust can be recognized geyser cones are evident on the slopes of the Salar. LQ6DODUGH5LQFyQZKLFKFRUUHVSRQGWRDQDOOXYLDO 7LQFDODQGXOH[LWHDUHDVVRFLDWHGZLWKERURQÁRZV depositional sequence and precipitation of dissolved from extinguished hydrothermal fountains located VROLGVJHQHUDWLQJVDOLQLW\JUDGLHQWVDQGVDWXUDWLRQ alongside important fractures adjacent to the Salar’s of the brines in sodium chloride toward the nucleus western boundary. RUFHQWHURIWKHVDODUE\IROORZLQJWKHQDWXUDOVORSH Dr Sorentino conducted a evaluation of the deposit in direction NW–SE. and produced the JORC reserve estimates. Dr Carlos Sorentino and Sue Border of Geos Consulting evaluated the 14 drill holes and data Pyke Hill that has been collected to date. Geos Consulting provided the above reserve estimates for the Rincon The Pyke Hill Project in Western Australia comprises Salar. Dr Sorentino and Mr D Galli provided the JORC a single granted Mining Lease which covers an area 2 estimates for the Ulexite deposit at Rape. of 5.37km . The project is located approximately 40km southeast of the Murrin Murrin Nickel Rapè Ulexite Deposit Operation operated by Minara Resources Limited and is considered prospective for a high grade ,Q WKH $UJHQWLQLDQ 3XQD HYDSRULWLF VWUDWD nickel laterite deposit. Admiralty Resources has a accumulation began about 150 million years ago joint venture option agreement in place with Cougar LQ D SURFHVV WKDW LV VWLOO FRQWLQXLQJ DQG FXUUHQWO\ Metals NL (Cougar). FRYHUV DERXW NPLQGLVWLQFWHYDSRULWLF Data generated from nickel exploration at the Pyke ERGLHV¶VDODUHV· LQ 6SDQLVK 7KHVH VDODUV YDU\ LQ Hill Project undertaken over the last 35 years has surface area from 1600 km2 in Arizaro down to UHVXOWHG LQ WKH GHÀQLWLRQ RI QLFNHOFREDOW ODWHULWLF NP LQ 'LDEOLOORV DQG FROOHFWLYHO\ FRQVWLWXWH one of the largest evaporites in the world. Similar HQULFKPHQW ZLWKLQ WKH ZHDWKHUHG SURÀOH DW WKH project along a strike length of 2000m and over evaporitic deposits exist in the Chilean Puna and in widths of up to 450m. Grades of up to 2.15% nickel the Bolivian Altiplano. and 0.67% cobalt have been encountered in the The Salar de Olaroz is located in the Jujuy Puna. The ODWHULWHSURÀOHLQSUHYLRXVGULOOLQJ geographical coordinates for its centre of gravity The Pyke Hill Project has the potential to contain are approximately 66o 45’ W and 25o 30’ S. With a shallow to moderate depth zones of high-grade SHULPHWHURIVRPHNPWKH6DODUFRYHUVDQDUHD nickel-cobalt laterite mineralisation. Cougar has RI NP DQG KDV D FDWFKPHQW DUHD RI undertaken a limited drilling program in the project km2. The Salar is located 3800 m above sea level. area as part of an initial due diligence program 7KHGRPLQDQWERURQPLQHUDORFFXUVDVDVXSHUÀFLDO GHVLJQHG WR FRQÀUP VHYHUDO RI WKH SUHYLRXVO\ OD\HURIXOH[LWHDSOD\DRFFXUULQJDVEDQNVRIXSWR reported drill intersections and to test the chemical 1.5 m of ulexite mineral or as ulexite crystallised as and metallurgical characteristics of the laterite “cotton balls” varying from less than 2 and up to 20 PLQHUDOLVDWLRQ6DWLVÀHGZLWKWKHUHVXOWVRIWKLVWHVW cm in diameter. GULOOLQJ &RXJDULQWHQGV WR FRQGXFW D V\VWHPDWLF drilling program of 200m x 100m spaced holes over ,Q &DWDODQRFDUULHGRXWDGHWDLOHGVXUYH\RI the laterite mineralisation at the project area. The WKH2ODUR]6DODULQFOXGLQJERUHKROHVWRVWXG\ aim of this drilling is to produce an Inferred Resource the development and distribution of borate layers. for the Pyke Hill Project. $SDUW IURP XOH[LWHDQG WLQFDO KH DOVR UHSRUWV WKH presence of hydroboracite and colemanite minerals Under the option agreement Cougar have an WKDWKDYHQRWEHHQFRQÀUPHGLQSRVWHULRUVWXGLHV REOLJDWLRQWRGHÀQHDQDGGLWLRQDOUHVRXUFHWRH[WHQG WKHPLQHOLIHSDVWÀYHWRVL[\HDUV Borates concentrations are related to a fault located in the Salar’s western boundary that is expressed in the surface and shows signs of hydrothermal activity. A wide calc-sinter platform and some Admiralty Resources NL 2005 Annual Report 79 Bulman mineral lease Bulman The leases in part contain and are surrounded by early to middle Proterozoic McArthur Basin rocks The Bulman Project is a zinc and lead oxide deposit LQFOXGLQJ.DWKHULQH5LYHU*URXS0W5LJJ*URXSDQG located in southern Arnhem Land in Australia’s Roper Group lithologies transected by the northwest Northern Territory. WUHQGLQJ%XOPDQ)DXOWZKLFKLVDVVRFLDWHGZLWKWKH zinc and lead mineralisation at Bulman. Admiralty Resources are currently in negotiations with the traditional landowners to do further sampling 7KHFRPELQHG´UHVHUYHVµÀJXUHTXRWHGE\((&ZDV ZRUNDQGEHWWHUGHÀQHWKHOHDVHVWRGHWHUPLQHWKH estimated following a programme of shaft sinking areas acceptable for prospecting. and bulk sample analysis at several localities inside and outside the current leases. Later drilling Mineral Lease Numbers (MLN’s) 726 and 727 downgraded zinc and lead potential at depth due to (Marumba) form the Bulman zinc and lead Project D VLJQLÀFDQW VLOO RI GROHULWH RFFXUULQJ DW VKDOORZ WR and are held by Admiralty Resources NL (previously moderate depth beneath the known mineralisation. Thunderbolt Resources NL) through our wholly +RZHYHUVLJQLÀFDQWQHDUVXUIDFH]LQFDQGOHDGR[LGH owned subsidiary Moonlight Mining NL. The leases RUH UHPDLQV EXW ODUJHO\ XQWHVWHG ZLWK UHVSHFW WR DUHKHOGRYHUWKH%XOPDQEDVHPHWDO XQFODVVLÀHG modern systematic sampling and drilling practices. UHVRXUFHV GHÀQHG LQ WKH ·V E\ (QWHUSULVH Exploration Company (EEC). $OLWHUDWXUHUHYLHZRIDYDLODEOHRSHQÀOHH[SORUDWLRQ data from the 1950’s to the present day has Combined geological ore “reserves” estimated by KLJKOLJKWHGWKH%XOPDQ/HDVHVDQGÀYHQHDUE\]LQF ((& ODWHU&5$([SORUDWLRQ3W\/WG LQWKH ·VIRU and lead occurrences as having potential for at least VHYHUDO PLQHUDOLVHG ´VKRRWVYHLQVµ ZHUH one million tonnes of at-surface and near-surface tonnes @ 15% Zn and 2% Pb of mainly oxide exploitable oxide and sulphide ore at greater than material. 10% combined zinc and lead. 80 Admiralty Resources NL 2005 Annual Report Nilnav Orthopaedics Admiralty Resources have acquired a 10% interest in Nilnav Orthopaedics - an organisation RIIHULQJ DUHYROXWLRQDU\ VXUJLFDO WHFKQLTXH DQG SDWHQWHGWRROVHWIRUPLQLPDOO\LQYDVLYH´RQHFXWµ incision hip replacements. Nilnav has entered into an agreement with the NeuMedix Group to globally commercialise the technology. Lollipop alignment tool The Nilnav technology and procedures make it a major development in orthopaedic surgery in the • A customised jig is used to ensure accuracy last 40 years. when cutting the fermoral head from the greater trochanter. Nilnav’s minimal invasive surgical (MIS) technique utilises its patented toolset to deliver total hip • A specialised tool is used to remove the femoral UHSODFHPHQWV WKURXJK D FP LQFLVLRQ ZLWKRXW head. dislocation and minimal tissue damage. The tools are simple to use and allow orthopaedic surgeons • A specialised reamer attachment for the femur extreme precision and orientation in the placement to make the MIS easier and to assist with navigation down the center of the femur. DQGDOLJQPHQWRIWKHSURVWKHWLFKLSHOLPLQDWLQJWKH need for computer aided surgery tools or guess • The Nilnav “lollipop” alignment tool is used to work. accurately place and insert the acetabular cup. A positive factor for a prosthetic manufacturer is • Application of the Nilnav spacer system for that the Nilnav toolset is adaptable to meet various accurate alignment with reduced physical LPSODQWVSHFLÀFDWLRQV2QFHDGDSWHGLWFDQEHXVHG trauma namely minimal tissue disturbance and in conjunction with standard toolsets to perform the no dislocation. Nilnav MIS procedure. The Nilnav system has been demonstrated in the The key elements to the Nilnav procedure are: 86 (XURSH $VLD DQG $XVWUDOLD 1HJRWLDWLRQV DUH • 2QHVPDOOLQFLVLRQJHQHUDOO\FPWKDWGLVVHFWV FXUUHQWO\ SURFHHGLQJ ZLWK D ODUJH RUJDQLVDWLRQ the facia tissue and the two short external ZLWKJOREDOLQWHUHVWVKDYLQJH[SUHVVHGDQLQWHUHVW rotator tendons. All other muscles remain in in obtaining an exclusive licence over the Nilnav Technology. WDFWDQGWKHUHLVQRGLVORFDWLRQRIWKHKLSZKLFK is a major advancement. The short external rotators are reattached before completion of the operation. Admiralty Resources NL 2005 Annual Report 81 $6;$QQRXQFHPHQWV.H\KLJKOLJKWV 2 September 2005 :KDWDUHWKHEHQHÀWVRI$'5·VWRXVLQYHVWRUV US investors can use ADR’s as a convenient means AMERICAN DEPOSITARY RECEIPT WR DFKLHYH SRUWIROLR GLYHUVLÀFDWLRQ WKURXJK JOREDO PROGRAM REGISTERED WITH SEC investment generally preferring to purchase ADR’s rather than ordinary shares in the issuers’ home ALLOWS US INVESTORS TO ACQUIRE PDUNHW EHFDXVH $'5·V WUDGH FOHDU DQG VHWWOH ADMIRALTY RESOURCES SHARES according to US market conventions. The Board of Admiralty Resources NL is pleased to SEC approval announce that the Bank of New York has entered Our advisors in the US have indicated that it will take into an agreement with Admiralty Resources to approximately 30 days for the SEC to complete the administer and promote Admiralty Resources’ documentation process. We have been advised American Depositary Receipts (ADR) program. An that we can expect the program to go live on or soon application has been made to the United States (US) after the 26th September 2005. Investors can Securities and Exchange Commission (SEC) to allow obtain quotes through the Bank of New York (www. a minimum of 250 million shares to participate in adrbny.com) or their Broker. The code will be made WKH$'5SURJUDPHQDEOLQJ86LQYHVWRUVWRDFTXLUH available on the Admiralty Resources website. RQPDUNHW$GPLUDOW\5HVRXUFHVVKDUHVIRUHDFK ADR they purchase. This is not a new issue and Admiralty Resources is aware that its South American there is no dilution of shareholders equity. DVVHWVDQGLQSDUWLFXODULWVOLWKLXPUHVRXUFHVKDYH and continue to create strong interest amongst What is an American Depository Receipt the Investment Community throughout the United $Q $'5LVD QHJRWLDEOH FHUWLÀFDWH UHSUHVHQWLQJ 6WDWHV,QUHVSRQVHWKH%RDUGPDGHWKHGHFLVLRQ ownership of shares in a non –US corporation. to enter the ADR market thus establishing brand $'5·V ZHUH VSHFLÀFDOO\ GHVLJQHG WR IDFLOLWDWH WKH awareness and increasing its brand equity in the SXUFKDVH KROGLQJ DQG VDOH RI QRQ86 VHFXULWLHV 86OHDGLQJWRDQWLFLSDWHGLPSURYHGVKDUHYDOXHDV by US investors. Depository Receipts in the form US investors acquire Admiralty Resources shares of Global Depository Receipts have existed since through the ADR program. the 1920’s. ADR’s are registered with the SEC and trade like any other security in the over-the-counter market on a national exchange. Investors purchase and sell ADR’s through their US brokers in exactly the same way as the purchase or sale of securities of US corporations. 82 Admiralty Resources NL 2005 Annual Report $XJXVW -XO\ RHEOCHEM LTD SIGNS HEADS ACQUISITION OF TWO SIGNIFICANT OF AGREEMENT AND AGENCY IRON ORE PROPERTIES WITH 17 AGREEMENT – WILL BUY UP TO STRONG MAGNETIC ANOMALIES 10,000 TONNES OF POTASH WORTH Sociedad Contractual Minera Santa Barbara USD1,500,000 6&06% ZKLFKLVFXUUHQWO\ RZQHGE\$GPLUDOW\ Resources NL has acquired two new tenements at a The Board of Admiralty Resources NL has reached recent sealed tender bid conducted by the Chilean DJUHHPHQWZLWK5KHRFKHPDSXEOLFO\OLVWHGFRPSDQ\ Government. This is consistent with SCMSB’s quoted on the AIM (Alternative Investment Market – strategy to ensure that SCMSB has access to high code RHEP) of the London Stock Exchange to acquire grade iron ore properties which become available to EHWZHHQDQGWRQQHVSHUDQQXPDV meet future demand for iron ore as well as increase SULQFLSDODQGRQDQDJHQF\EDVLV5KHRFKHPZLOOVHOO its reserves. It also allows SCMSB to optimise ore DQDGGLWLRQDOWRQQHVRI3RWDVVLXP&KORULGH VSHFLÀFDWLRQV WR PHHW VSHFLÀHG FRQWUDFW OHYHOV RI (“potash”). The current world price is US$150 per iron concentration. tonne and this price benchmark is referred to in the Results of the Sealed Bid Tender agreement. &06%ZDVVXFFHVVIXOLQDFTXLULQJKHFWDUHV $GPLUDOW\ 5HVRXUFHV SODQV WR SURGXFH comprised of: tonnes of Potash per year commencing in 2006. Potash production is a precursor process to the 3DPSD7RORORWHQHPHQWFRYHULQJ production of lithium chloride. This is a welcomed KHFWDUHVGLYLGHGLQWRSURSHUWLHVDQG development for Admiralty Resources’ wholly owned VXEVLGLDU\ LQ $UJHQWLQD $'< 5HVRXUFHV /WG DV &HUUR9DULOODFRYHULQJ KHFWDUHVZLWK 5KHRFKHPKDYHVLJQLÀFDQWH[SHUWLVHLQWKHVDOHVRI 321 properties. potash and other specialty chemicals. Rheochem 6&06% KDV FRPPLWWHG WR VSHQG 86' LV EDVHG LQ 3HUWK :HVWHUQ $XVWUDOLD SURYLGLQJ over the next twelve months further exploring the specialised technical services and chemicals to the tenements and complete an inferred JORC resource international Petroleum and Mining industries. estimate. The Rincon Salar brine deposit in Argentina is a Property Location VLJQLÀFDQW PXOWLHOHPHQW GHSRVLW EHLQJ GHYHORSHG E\ $GPLUDOW\ 5HVRXUFHV WKDW LV ULFK LQ OLWKLXP The properties are located within 30 kilometres of: SRWDVVLXP PDJQHVLXP DQG ERUDWHV $GPLUDOW\ a) SCMSB’s existing tenements which have a 5HVRXUFHV ZLOO SURGXFH SRWDVK OLWKLXP FKORULGH previously documented estimate of 41 million boric acid and sodium sulphate from its deposits WRQQHVDQG in Argentina. This sales arrangement is consistent with the Board’s strategy as stated and detailed at b) the famous Los Colorados iron ore mine that RXUZHEVLWH)RUPRUHGHWDLOVSOHDVHJRWRZZZ commenced in 1998 and is owned and operated ady.com.au. E\&RPSDxtD0LQHUDGHO3DFLÀFR6$·VXEVLGLDU\ CAP whose major shareholder is Mitsuibishi. The Los Colorados open cut mine has reserves of over 73 million tonnes. Admiralty Resources NL 2005 Annual Report 83 Tender Process -XO\ SCMSB was awarded the two tenements based on JORC Inferred Resource Estimate LWV FRPPLWPHQW WR IXUWKHU H[SORUH WKH SURVSHFWV LWV IRFXV RQ LURQ RUH PLQLQJ DQG H[SRUW LWV DELOLW\ 70,000 tonnes Lithium, 1.3 million to arrange the necessary permits in an orderly and tonnes of Potassium. Substantial SURIHVVLRQDOPDQQHUWKHTXDOLW\DQGH[SHULHQFHRI LWVPLQLQJHQJLQHHULQJ WHDP DQG LWV VROLG ÀQDQFLDO mine life and Revenues backing. The Board of Admiralty Resources NL is pleased Geophysical Survey Data to announce it has received a JORC (Australasian Joint Ore Reserves Committee) compliant inferred A preliminary report has been received from UHVRXUFHHVWLPDWLRQRIWKH5LQFRQ6DODU$UJHQWLQD WKH OHDGLQJ JHRORJLFDO FRQVXOWLQJ JURXS LQ &KLOH brine resource from Sue Border of Geos Mining Metalica Consultores detailing the results of the Consultants. Her report is attached. GLJLWDO PDJQHWLF VXUYH\6HYHQWHHQ VLJQLÀFDQW DQRPDOLHV KDYH EHHQ LGHQWLÀHG WKURXJK PDJQHWLF Inferred Resources susceptibility studies recently completed by CMSB. 7KHUHDUHWZRHVWLPDWLRQVLQWKHUHSRUWRQHLVRYHU Three of these anomalies in Cerro Varilla have SI an area of approximately 24 sq kilometers that was values between 0.5 and 2.0 indicating that there drilled and the other is over the remainder of the is magnetite present in varying concentrations WHQHPHQWVKHOGE\$GPLUDOW\5HVRXUFHV·VXEVLGLDU\ between 16% and 32% in the host rock. Studies ADY Resources Ltd. Ms Border reports the lithium have shown ore bodies to be between 70 and 100 metal equivalent contained in the drilled area is PHWUHVLQWKLFNQHVV$WDQRPDOLHV/2DQG3WKH WRQQHVDQGSRWDVVLXPLVPLOOLRQWRQQHV concentration is between 32% and 64% magnetite. In the remainder of the tenements the lithium metal The depth of the ore bodies of interest are estimated HTXLYDOHQWLVWRQQHVDQGPLOOLRQWRQQHV to range from 50 metres to 150 metres. of Potassium. Further Studies to Develop the Resource Mine Life $IWHUPRUHGHWDLOHGJHRORJLFDOVWXGLHVDUHFRPSOHWHG The rate of extraction of Lithium Chloride is planned Sociedad Contractual Minera Santa Barbara will WR EH WRQQHV SHU DQQXP LPSO\LQJ D PLQH decide on gravimetric and drill hole studies to life of more than 127 years from total reserves. The further enhance the information from the magnetic UDWHRIH[WUDFWLRQRI3RWDVVLXP&KORULGHLV and geological studies. After this is completed a tonnes per annum implying a mine life of more than JORC study will be conducted. 220 years. The Board has concluded that these )RUPRUHGHWDLOVRQ$GPLUDOW\5HVRXUFHV1/SOHDVH PLQH OLYHV DUH PRUH WKDQ VXIÀFLHQW WR MXVWLI\ WKH go to www.ady.com.au. proposed capital expenditure. Final Product Amounts and Revenues 7KH%RDUGKDVFRPSXWHGWKDWWKHUHVHUYHRI WRQQHV RI OLWKLXP HTXDWHV WR WRQQHV RI OLWKLXP FKORULGH RU WRQQHV RI OLWKLXP FDUERQDWH$WFXUUHQWPDUNHWSULFHVRI86' IRUOLWKLXPFKORULGHWKHPLQHOLIHUHYHQXHVIURPWKLV VHFWLRQ RI WKH WHQHPHQW DUH 86' PLOOLRQ )URPWKHSRWDVVLXPHVWLPDWHRIPLOOLRQWRQQHV 2.48 million tonnes of potassium chloride can be produced with a mine life revenue of USD$372 million. 84 Admiralty Resources NL 2005 Annual Report Further Work to Complete a JORC “Proven” -25&67$7(0(17 Status Estimate $UJHQWLQD'LDPRQGV/WGDZKROO\RZQHGVXEVLGLDU\ In Ms Border’s report she comments that “Based on RI $GPLUDOW\5HVRXUFHV1/KROGVPLQLQJWLWOHV the measured effective porosity of analogous salars FRYHULQJWKHVRXWKHUQVHFWLRQRIWKH6DODUGHO5LQFyQ LQWKHDUHDWKHSRURVLW\DW5LQFRQLVHVWLPDWHGWREH Argentina. The Salar is a salt lake underlain by a 8%.” ADY Resources has contracted with engineers WKLFNVHTXHQFHRIHYDSRULWHV,QWKHVHWHQHPHQWV to immediately conduct detailed hydrometallurgical mapping has shown the evaporites are dominantly studies to determine the effective porosity of the KDOLWH DQG WKH JHRORJ\ LV XQLIRUP RYHU WKH ZKROH Rincon Salar so that the proven estimate of the area. resource can be computed. This study will also provide key information to locate the production &DUORV 6RUHQWLQR DQ LQGHSHQGHQW FRQVXOWDQW KDV pumping and monitoring stations. YHULÀHG WKHVH PLQLQJ WHQHPHQWV DUH LQ JRRG OHJDO VWDQGLQJ$OOOHJDOÀVFDODQGHQYLURQPHQWDOSHUPLWV have been obtained and the company is entitled to their exploitation. They include: Admiralty Resources NL 2005 Annual Report 85 13 holes were drilled to a maximum depth of 62m -XQH LQ WKH VRXWKHDVW RI WKLV DUHD VSDFHG RYHU NP apart. 72 samples of brines have been analysed Conversion of 25 Million Unlisted from these holes; these show only minor variation in concentration across this area. The concentrations Options RIOLWKLXPSRWDVVLXPDQGPDJQHVLXPLQWKHEULQHV The Board of Admiralty Resources NL issued 175 were estimated by ordinary kriging. Based on the million unlisted options to MTM Holdings (Australia) measured effective porosity of analogous salars Pty Limited in December 2004. MTM Holdings have LQWKHDUHDWKHSRURVLW\DW5LQFRQLVHVWLPDWHGWR advised that they intend to exercise 87.5 million be 8%. A density of 1.2 was measured from the unlisted options over the next 60 days. Admiralty drilling. Resources will use the funds towards meeting its working capital needs for the Argentina and Chile )URPWKLVGDWDDQLQIHUUHGUHVRXUFHFDQEHHVWLPDWHG projects. for the drilled area. Due to the uniformity of the JHRORJ\DQGRIWKHPHDVXUHGEULQHFRQFHQWUDWLRQV We have received written notice and cleared funds it is reasonable to extrapolate this over the rest of of $2.5 million for the exercise of 25 million unlisted $GPLUDOW\5HVRXUFHV·WHQHPHQWVDVLQWKHDWWDFKHG options. The balance of 62.5 million options will be table. exercised over the next sixty days. 7KLVVWDWHPHQWKDVEHHQSUHSDUHGE\6XH%RUGHU 7ZHQW\ÀYHPLOOLRQVKDUHVZLOOEHLVVXHGVKRUWO\WR who is a Member of the Australasian Institute of the holder of the options. A further announcement Mining and Metallurgy. Sue Border is a consultant will be made regarding the issue of the shares. HPSOR\HGE\*HRV0LQLQJ6XH%RUGHUKDVVXIÀFLHQW relevant experience to qualify as a competent person DVGHÀQHGLQWKHHGLWLRQRIWKH$XVWUDODVLDQ Code for Reporting of Mineral Resources and Ore Reserves. Sue Border consents to the publication of this statement in the form and context in which it appears. 86 Admiralty Resources NL 2005 Annual Report For further information visit us at www.ady.com.au Admiralty Resources NL GPO Box 517, Melbourne VIC 3001 Level 6, 150 Queen Street, Melbourne VIC 3000 [T] +61-3-9642 3535 [F] +61-3-9670 8965 AR2005