26 Nov 2008 09:08
Altona Resources Plc / Index: AIM / Epic: ANR / Sector: Exploration & Production
26 November 2008
Altona Resources Plc ('Altona' or 'the Company')
Final Results for the year ended 30 June 2008
Notice of AGM
Altona Resources, the AIM listed Australian based energy company, announces its final results for the year ended 30th June 2008 and gives notice of its Annual General Meeting to be held on 19 December 2008.
Overview
Completion of pre-feasibility study for 10 million barrels per year coal-to-liquids and 560MW co-generation power facility at Arckaringa
Movement of Arckaringa Project into final stage of bankable feasibility study
Confirmation of JORC compliant resource estimate of 1.287 billion tonnes of coal at the Company's wholly owned Wintinna deposit
Raised £3,615,500 through two placing tranches pursuant to a share subscription agreement with Tongjiang International Energy Co. Ltd., with the third placing tranche of £8,002,500 deferred
Memorandum of Understanding ('MOU') with CNOOC (Beijing) Energy Investment Co., Ltd
Extension of MOU with BP
Proposed Australian Securities Exchange ('ASX') listing
For further information visit www.altonaresources.com or please contact:
| Christopher Lambert | Chairman | Tel: +44 (0) 207 024 8391 | |||
| Christopher Schrape | Managing Director | Tel: +61 (0) 417 984 434 | |||
| Hugh Oram | Ambrian Partners Limited | Tel: +44 (0) 207 634 4705 | |||
| Victoria Thomas | St Brides Media & Finance Ltd | Tel: +44 (0) 207 236 1177 |
The report and accounts for the year ended 30th June 2008 have today been posted to shareholders. An electronic version of the report and accounts is also available on the Company's website at www.altonaresources.com.
The information contained in this announcement has been reviewed by Norman Kennedy, the Technical Director of the Company. Mr Kennedy holds a Bachelor of Science from the University of NSW, and is a Member of the Australian Institute of Mining and Metallurgy. Mr Kennedy has more than five years' experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a competent person as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resource and Ore Reserves. Mr Kennedy consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.
CHAIRMAN'S STATEMENT
The past year has seen Altona make significant progress towards the development of the Arckaringa Project, amid challenging market conditions.
In May 2008, the Company achieved the major milestone of completing the technical aspects of the pre-feasibility study ('PFS') for our proposed integrated mine, 10 million barrel per annum coal-to-liquids ('CTL') and 560MW co-generation power facility at Arckaringa. This facilitated Altona to move towards the final stage of the Bankable Feasibility Study ('BFS'), the Final Feasibility Study ('FFS').
Subsequently, the Company appointed leading engineering consultants Jacobs Australia Pty Ltd and project management firm, Enthalpy Pty Ltd, to form an Integrated Owners Team to work with Altona on the important selection of a Study Engineer and to then work in conjunction with the selected firm towards completing the FFS, within an agreed cost and time frame.
We are pleased to report that the tender process for the selection of the Study Engineer has progressed very positively with Altona receiving bids from a number of market leading international engineering firms. The bids are currently being evaluated by the Company in conjunction with its Integrated Owners Team, and the Company expects to decide the successful candidate for the role of Study Engineer prior to the end of 2008.
During the year Altona welcomed Tongjiang International Energy Co. Ltd ('Tongjiang'), a Hong Kong based investment company, as the Company's largest shareholder, following the completion of two placing tranches totalling £3.61 million under a share subscription agreement.
In conjunction with the share placings, Mr. Michael Zheng, Chief Executive of Tongjiang, was appointed to Altona's Board. The contribution of Michael and Tongjiang, with their extensive contacts in China, has been and continues to be, invaluable to the Company.
In August 2008, Altona was very pleased to enter into a Memorandum of Understanding ('MOU') with CNOOC (Beijing) Energy Investment Co., Ltd ('CNOOC Energy'), a subsidiary of China National Offshore Oil Corporation, one of the three largest State owned oil companies in the Peoples Republic of China. The MOU provides the basis for CNOOC Energy and Altona to build a long-term co-operative relationship towards the development of the Company's CTL and Power co-generation Arckaringa Project in South Australia. We are delighted to have received this interest and support from CNOOC Energy and we look forward to building a long term relationship with them.
The Company was also pleased to announce in July the extension of our existing MOU with BP, a non binding agreement to co-operate in evaluating the potential of CTL developments and market potential for CTL fuel products and technology.
In view of the current financial market turmoil, the Company is deferring the proposed listing on the Australian Stock Exchange ('ASX'), until market conditions become more favourable. In conjunction with the deferment of the ASX listing, Altona has agreed with Tongjiang to defer the completion of the Tranche 3 placement of £8,002,500 until the Company has more clarity regarding the ASX listing or the funding requirements of the Study Engineer for the FFS. In the mean time, Tongjiang continue with their valuable support in China.
Notwithstanding the challenging financial market conditions, we remain confident on the Company's future progress, underpinned by its world class energy bank in the Arckaringa coal deposits. The scale of these deposits was confirmed in September, with the announcement of a JORC compliant Coal Resource Estimate of 1.287 billion tonnes at its Wintinna Coal Deposit, which related to only 25% of the area covered by the known Wintinna deposit and specifically evaluated the main area targeted for coal extraction by open cut methods.
We look forward to the continued development of the exciting Arckaringa Project and realising our ambition to be a major contributor in meeting South Australia's growing demand for power, as well as becoming a significant producer of clean fuels to both the domestic and international markets.
I would like to thank our shareholders for their continuing support, particularly when we are facing such turbulent times within the global markets. I would also like to personally thank the Board, management and team of consultants for all of their hard work in continuing the development of the Arckaringa Project.
Chris Lambert
Chairman
24 November 2008
OPERATIONS REPORT
Over the last year Altona has continued to focus on its high value added business model of an integrated mine and CTL plant with a co-generation power facility at the Arckaringa Project in South Australia. During the year, the Company successfully completed the PFS section of the BFS for the Arckaringa Project and established a sound basis for the Board's decision in May 2008 to proceed to the FFS.
Following this extensive evaluation process the Board confirmed a Base Case comprising of:
A 10 Million Tonne Per Annum ('MTPA') open cut mine based on the Wintinna deposit (EL 3361)
A CTL plant producing 10 Million Barrels Per Annum ('MBPA') or 30 Thousand Barrels Per Day ('KBPD') of liquid products, mainly zero sulphur diesel fuel plus by-products including naptha, sulphur and high quality water
1140 MW of power of which 560 MW is available for export
On this basis, one tonne of Wintinna coal can be seen to yield one barrel of liquids plus power and industrial products, significantly adding value beyond supplying coal simply for conventional power generation.
The project economic model, which was compiled from the results of the PFS studies undertaken by Altona's specialist CTL/Power plant engineering and mine design advisers, confirmed a potentially robust long term operation with high revenue earning capability and competitive costs. The indicated unit production ('operating') cost of around US$35 per barrel, on the basis of liquids production alone, is competitive with global CTL industry operating cost benchmarks.
The attractiveness of the project is significantly enhanced by the revenue available from the sale of power into the increasingly supply deficient South Australian market. Projected net unit operating costs are effectively reduced to US$20 per barrel of liquid products when the sale of the base case 560 MW of power at recent base load prices is applied against costs. This would place the project at the very low end of CTL industry operating cost benchmarks and indicates that it could make operating profits under virtually all future oil price forecasting scenarios.
The Base Case at Arckaringa combines two 5 MBPA modular phases to be completed over a 4- 4.5 year construction period, at a projected capital cost of US$2.7 billion for CTL and Power and US$0.5 billion for the mine (including mine development operating costs). The Company is confident that these capital costs, which are within the typical range for CTL projects worldwide, can be offset by the large revenue generating capacity of the project, also underpinned by strong location advantages.
Technical and marketing studies conducted during the PFS have underlined a number of factors that make South Australia and the Arckaringa region a particularly attractive location for a CTL and power project. These include:
Political and economic stability in the region, which is critical to the success of a long life, high capital cost project
Abundant and technically suitable coal resources at Wintinna and in the Company's other leases
Easy access to the Adelaide - Darwin rail and road links which transect the Company's leases
Growing foreign and domestic markets for fuels and power, plus industrial process inputs such as sulphur and water
South Australia is dependent on imported diesel and available power supply is officially forecast to fall increasingly short of demand. This is mainly attributable to numerous new mining and minerals processing developments taking shape across the State and in the neighbouring Northern Territory. As such, the Arckaringa Project will be ideally positioned to address the expected power deficit and will also be uniquely placed to benefit the region in a number of other ways:
To supply both fuel and power to new resources and industrial projects
To act as a catalyst for regional development and employment
To enhance power supply to the State grid and the National Electricity Market
To provide commercial grade sulphur and potentially a range of chemical feedstocks such as naphtha
To supply water to the region from mine dewatering and plant processes, subject to appropriate environmental management and approval
Altona carried out a diverse field work programme during the reporting period. The work included drilling to update the Wintinna deposit to current JORC classification standards, extracting a five tonne bulk sample for coal quality and process testing and updating hydro-geological (groundwater) and geotechnical assessments. The field programme, completed in February 2008, focussed on the optimum area within Wintinna for the extraction of coal by open cut mining methods and as such, was designed to define and classify at least 700 million tonnes ('mt') of coal as Measured or Indicated, in compliance with the 2004 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the 'JORC Code').
The resources statement and geological model for the Wintinna deposit was subsequently prepared by McElroy Bryan Geological Services of Sydney using the coal seam and quality data from the 2007/2008 drilling programme and historical exploration data from a total of 142 new and historic boreholes. The statement confirmed a JORC compliant coal resource of 1,287mt, including 837mt in the Measured and Indicated categories, comfortably in excess of the programme target. These resources are in an area that covers only 25% of the total area of the known Wintinna deposit, confirming the deposit's capacity to support a large scale coal conversion process for well beyond bankable mine planning horizons.
The bulk sample and coal extracted from slim diameter holes has also been used for various tests and analyses to define the optimum specifications for the mining and preparation of Wintinna coal in relation to the CTL process. Test work commenced in September 2007 at the Newcastle laboratories of ACIRL Pty. Ltd, in accordance with the test programme supervised by Altona's coal quality and testing consultants, QCC Resources Pty. Ltd. (part of DownerEDi Mining). Analysis of results has so far confirmed the coal quality characteristics defined from past programmes and in addition, the coal's washability profile.
Geotechnical and hydro-geological programmes were conducted by Resource and Environmental Management Pty. Limited ('REM') in Adelaide, one of Australia's leading groundwater modelling and planning consultants, in conjunction with its specialist geotechnical engineering partner, Snowden. These programmes included the monitoring of ground water levels, drilling of production wells and monitoring piezometers (wells with observation devices). The results of this work were incorporated into a Numerical Groundwater Model to assess regional drawdown impacts and allow for appropriate mine dewatering plans. The geotechnical data has been used in a report to define mine design parameters, including recommended slope angles and working area dimensions to ensure safe working conditions within a dewatered mining environment.
In parallel with the field programme, the Company also completed a number of pre feasibility level assessments during the year. These assessments covered issues surrounding CTL technology and costs, mine costs, electricity and fuels markets, infrastructure and environmental issues.
To facilitate the transition to the FFS, the Company has commenced the process of selecting a specialist project engineering company to be the FFS Contractor. Altona has received strong expressions of interest from leading engineering companies to take on this role and will be deciding the successful candidate in Q4 2008. In June, the Company appointed Jacobs Australia and Enthalpy Pty Ltd, both highly qualified project management specialists, to join with Altona to form a core Integrated Owners Team of experienced staff to oversee this critical stage of project development.
The Company recognises the need to give priority attention to potential environmental and social impact issues surrounding the Project. As part of the FFS, Altona has commenced further evaluation of regional water supply impacts and mitigation, based on the groundwater modelling and covering the use and disposal of water in an area subject to water allocation approvals. Additionally, recognising that the CTL process is a prime example of "clean coal technology" (incorporating the extraction and storage of CO2), the Company has identified potential CO2 sequestration options for the project and will be investigating these further throughout the FFS period.
During the year, Altona continued its engagement with the community and presented the environmental and technical aspects of the Project to a number of regional forums and stakeholders. The Company has also continued to hold regular briefing sessions with the South Australian and Federal Governments, to inform them about progress on the Project and to help lay the basis for a timely and ordered framework for future environmental and development approvals.
The last twelve months have seen the Arckaringa Project enter into an exciting and challenging phase as the Company makes the transition into project design, approval and development. I am looking forward to working with the company's Owners Team and the Altona Board to complete the FFS and convert this Project's great potential into a profitable, world scale operation.
Chris Schrape
Managing Director
24 November 2008
CONSOLIDATED FINANCIAL STATEMENTS
INCOME STATEMENT
For the year ended 30 June 2008
| Group | Company | ||||
| Notes | 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Administration expenses | (824) | (675) | (781) | (674) | |
| Share based payments expense | - | (364) | - | (364) | |
| Total administrative expenses | 5 | (824) | (1,039) | (781) | (1,038) |
| Interest income | 6 | 58 | 29 | 58 | 29 |
| Loss before taxation | (766) | (1,010) | (723) | (1,009) | |
| Income tax expense | 9 | - | - | - | - |
| Loss for the year | (766) | (1,010) | (723) | (1,009) | |
| Loss per share expressed in pence - Basic and diluted | 8 | (0.26p) | (0.41p) | ||
All of the operations are considered to be continuing.
BALANCE SHEETS
As at 30 June 2008
| Notes | Group 2008 £'000 | Group 2007 £'000 | Company 2008 £'000 | Company 2007 £'000 | |
| ASSETS | |||||
| Non-current assets | |||||
| Intangible assets | 10 | 4,987 | 2,957 | - | - |
| Plant and equipment | 11 | 49 | 6 | 47 | 6 |
| Investment in subsidiaries | 12 | - | - | - | - |
| Trade and other receivables | 13 | 39 | 39 | 36 | 36 |
| 5,075 | 3,002 | 83 | 42 | ||
| Current assets | |||||
| Trade and other receivables | 13 | 93 | 65 | 73 | 39 |
| Loans to subsidiaries | 14 | - | - | 5,026 | 2,921 |
| Cash and cash equivalents | 18 | 2,720 | 1,638 | 2,715 | 1,627 |
| 2,813 | 1,703 | 7,814 | 4,587 | ||
| TOTAL ASSETS | 7,888 | 4,705 | 7,897 | 4,629 | |
| LIABILITIES | |||||
| Current liabilities | |||||
| Trade and other payables | 15 | 205 | 164 | 137 | 62 |
| NET ASSETS | 7,683 | 4,541 | 7,760 | 4,567 | |
| EQUITY | |||||
| Issued capital | 16 | 358 | 283 | 358 | 283 |
| Share premium | 6,550 | 3,226 | 6,550 | 3,226 | |
| Merger reserve | 2,001 | 2,001 | 2,001 | 2,001 | |
| Share based payments reserve | 401 | 401 | 401 | 401 | |
| Foreign exchange reserve | 508 | (1) | 517 | - | |
| Retained earnings | (2,135) | (1,369) | (2,067) | (1,344) | |
| TOTAL EQUITY | 7,683 | 4,541 | 7,760 | 4,567 |
The financial statements were approved by the Board on 24 November 2008 and signed on its behalf by:
Christopher Lambert
Director
CASH FLOW STATEMENTS
For the year ended 30 June 2008
| Group | Company | |||||
| Notes | 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | ||
| Operating activities | ||||||
| Loss for the period | (766) | (1,010) | (723) | (1,009) | ||
| Less: Interest income | (58) | (29) | (58) | (29) | ||
| (824) | (1,039) | (781) | (1,038) | |||
| Adjustment to reconcile profit before tax to net cash flows | ||||||
| Non-cash: | ||||||
| Depreciation | 18 | 1 | 18 | 1 | ||
| Foreign exchange adjustment | 101 | 22 | - | 37 | ||
| Share options expensed | - | 364 | - | 364 | ||
| Working capital adjustments | ||||||
| (Increase) in debtors | (28) | (59) | (34) | (42) | ||
| Increase/(decrease) in creditors | 75 | (59) | 75 | (59) | ||
| Net cash flows used in operating activities | (658) | (770) | (722) | (737) | ||
| Investing activities | ||||||
| Payments to acquire tangible fixed assets | (61) | (5) | (59) | (5) | ||
| Payments to acquire intangible fixed assets | (1,656) | (546) | - | - | ||
| Payment for bond deposit | - | (3) | - | - | ||
| Payments to subsidiary | - | - | (1,588) | (589) | ||
| Interest received | 58 | 29 | 58 | 29 | ||
| Net cash outflows used in investing activities | (1,659) | (525) | (1,589) | (565) | ||
| Financing activities | ||||||
| Net proceeds from issue of shares | 3,399 | 2,479 | 3,399 | 2,479 | ||
| Net cash inflow from financing | 3,399 | 2,479 | 3,399 | 2,479 | ||
| Net increase in cash and cash equivalents | 1,082 | 1,184 | 1,088 | 1,177 | ||
| Cash and cash equivalents at beginning of the year | 1,638 | 454 | 1,627 | 450 | ||
| Cash and cash equivalents at 30 June | 18 | 2,720 | 1,638 | 2,715 | 1,627 | |
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2008
| Share capital | Share premium reserve | Merger reserve | Share based payment reserve | Foreign currency translation reserve | Retained earnings | Total equity | |
| Group | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| As at 1 July 2006 | 231 | 829 | 2,001 | 7 | - | (359) | 2,709 |
| Shares capital issued | 52 | 2,599 | - | - | - | - | 2,651 |
| Share issue expenses | - | (204) | - | - | - | - | (204) |
| Share based payments | - | - | - | 396 | - | - | 396 |
| Options exercised | - | 2 | - | (2) | - | - | - |
| Currency translation differences | - | - | - | - | (1) | - | (1) |
| Loss for the year | - | - | - | - | - | (1,010) | (1,010) |
| Balance at 30 June 2007 | 283 | 3,226 | 2,001 | 401 | (1) | (1,369) | 4,541 |
| Share capital issued | 75 | 3,540 | - | - | - | - | 3,615 |
| Cost of share issue | - | (216) | - | - | - | - | (216) |
| Currency translation differences | - | - | - | - | 509 | - | 509 |
| Loss for the year | - | - | - | - | - | (766) | (766) |
| Balance at 30 June 2008 | 358 | 6,550 | 2,001 | 401 | 508 | (2,135) | 7,683 |
| Company | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||
| As at 1 July 2006 | 231 | 829 | 2,001 | 7 | - | (335) | 2,733 | |||||||
| Shares capital issued | 52 | 2,599 | - | - | - | - | 2,651 | |||||||
| Share issue expenses | - | (204) | - | - | - | - | (204) | |||||||
| Share-based payments | - | - | - | 396 | - | - | 396 | |||||||
| Options exercised | - | 2 | - | (2) | - | - | - | |||||||
| Loss for the year | - | - | - | - | - | (1,009) | (1,009) | |||||||
| Balance at 30 June 2007 | 283 | 3,226 | 2,001 | 401 | - | (1,344) | 4,567 | |||||||
| Shares capital issued | 75 | 3,540 | - | - | - | - | 3,615 | |||||||
| Cost of share issue | - | (216) | - | - | - | - | (216) | |||||||
| Currency translation differences | - | - | - | - | 517 | - | 517 | |||||||
| Loss for the year | - | - | - | - | - | (723) | (723) | |||||||
| Balance at 30 June 2008 | 358 | 6,550 | 2,001 | 401 | 517 | (2,067) | 7,760 | |||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Altona Resources Plc is a publicly listed company incorporated and domiciled in England & Wales under the Companies Act 1985. The Company's ordinary shares are traded on the Alternative Investment Market (AIM) operated by the London Stock Exchange.
2. ACCOUNTING POLICIES
The principal accounting policies are summarised below. They have been applied consistently throughout the period.
BASIS OF PREPARATION
The financial report is presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated.
The accounts have been prepared on a going concern basis. As is common with many junior mining companies, the Company raises money for exploration and capital projects as and when required. There can be no assurance that the Group's project will be fully developed in accordance with current plans or completed on time or to budget. Future work on the development of its project, the levels of production and financial returns arising there from may be adversely affected by factors outside the control of the Group.
The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act, 1985 applicable to companies reporting under IFRS.
The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The accounting policies have been applied consistently by group entities.
Statement of compliance
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements. Judgments made by the directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below in note 2 and in note 3.
Measurement convention
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value. Other financial liabilities are initially recognised at fair value at the date the contract is entered into, with the corresponding fair value adjustment being recognised through the income statement. Subsequent remeasurement to fair value is performed at each balance sheet date with any further adjustments being recognised through the income statement.
CHANGE IN ACCOUNTING POLICY
a) New standards, amendments to published standards and interpretations to existing standards effective on 1 July 2007 adopted by the Group.
| New and revised standards effective for 30 June 2008 year-ends | Standard | Effective for annual periods beginning on or after |
| New Standard | IFRS 7 - Financial Instruments: Disclosures The Group is in compliance with the requirements of IFRS 7. | 1 January 2007 |
| Amendment | IAS 1 - Presentation of Financial Statements - Capital Disclosures There was no impact on the adoption of IAS 1 on the results or net assets of the group. | 1 January 2007 |
| Interpretations | IFRIC 10 - Interim Financial Reporting and Impairment IFRIC 11 - IFRS 2 Group and Treasury Share Transactions | 1 November 2006 1 March 2007 |
b) New standards, amendments to published standards and interpretations to existing standards in issue at 30 June 2008 but not yet effective, that will be applicable to the Group in the future.
| New and revised standards issued but not effective for 30 June 2008 year-ends | Standard | Effective for annual periods beginning on or after |
| New Standard | IFRS 8 - Operating Segments | 1 January 2009 |
| Amendment | IFRS 3* - Business Combinations IFRS 2* - Share-based Payment - Vesting Conditions and Cancellations IAS 1* - Presentation of Financial Statements - A revised Approach IAS 23* - Borrowing Costs IAS 27* - Consolidated and Separate Financial Statements IAS 32 and 1* - Puttable Financial Instruments and Obligations Arising on Liquidation IAS 39 - Financial Instruments Recognition and Measurement - Eligible Hedged Items | 1 July 2009 1 January 2009 1 January 2009 1 January 2009 1 July 2009 1 January 2009 1 July 2009 |
| Interpretations | IFRIC 12* - Service Concession Arrangements IFRIC 13* - Customer Loyalty Programmes IFRIC 14* - IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction | 1 January 2008 1 July 2008 1 January 2008 |
Items marked * had not yet been endorsed at the date that these financial statements were approved and authorised for issue by the Board. The standards listed above that are not yet effective are not expected to have a significant impact on the Group.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
BUSINESS COMBINATIONS
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date
Goodwill, if any, arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
recognised immediately in profit or loss.
FOREIGN CURRENCIES
Transactions entered into by group entities in currency other than the currency of the primary economic environment in which they operate (the "functional" currency) are recorded at rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date.
On consolidation, the results of the operations are translated into Pounds Sterling at average rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at open rate and the results of overseas operations at actual rate are recognised directly in equity (the "foreign exchange reserve").
SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below
)i) Impairment of intangibles
The Group determines whether intangibles are impaired when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include the point at which a determination is made as to whether or not commercial reserves exist. The carrying amount of intangibles at 30 June 2008 was £4,987,000 (2007: £2,957,000).
(ii) Share based payment transactions
The Group measures the cost of equity settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model which is then discounted to take into account the lack of marketability of the options (where applicable), and the inherent limitations of the Black-Scholes model
INTANGIBLE ASSETS - EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation expenditure in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:
(i) the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions must also be met:
a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale, or
b) Exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and included acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts are circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (or the cash-generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.
Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to development.
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present value in determining recoverable amounts.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probably that future economic benefit associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation
Depreciation is calculated on a straight-line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
The following useful lives are used in the calculation of depreciation:
Plant and equipment 3 -20 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the income statement. When revalue assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.
TAXATION
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised except for differences arising on investments in subsidiaries and jointly controlled entities where the group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of the deferred tax assets is restricted to those instances where it is probable that the taxable profit will be available against which the difference can be utilised.
Deferred tax is also based on rates enacted or substantively enacted at the balance sheet date and expected to apply when the related deferred tax asset is realised or liability settled.
CASH AND CASH EQUIVALENTS
Cash consists of cash on hand and cash held on current account or on short term deposits with an original maturity of 3 months or less at variable interest rates.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above.
There is no significant difference between the carrying value and fair value of cash and cash equivalents.
FINANCIAL ASSETS
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The only financial assets currently held by the Group are classified as loans and receivables.
The Group's accounting policy for each category is as follows:
Cash and cash equivalents include cash in hand and other short term highly liquid investments with a maturity of 3 months or less. Any interest earned is accrued monthly and classified as interest. Short term deposits comprise deposits made for varying periods of between one day and three months.
Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.
There is no significant difference between the carrying value and fair value of receivables.
Trade and other receivables are initially measured at fair value and subsequently at amortised cost (using the effective interest rate) less allowance for impairment.
FINANCIAL LIAIBILITIES
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired. These are either fair value through profit or loss and other financial liabilities. At present, the Group does not have any liabilities classified as fair value through profit or loss.
The Group's accounting policy for the other financial liabilities category is as follows:
Other financial liabilities: Other financial liabilities include the following items:
Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. All interest and other borrowing costs incurred in connection with the above are expensed as incurred and reported as part of financing costs in the income statement.
IMPAIRMENT OF NON-FINANCIAL ASSETS
At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
THE COMPANY'S INVESTMENTS IN SUBSIDIARIES
In its separate financial statements the Company recognises its investments in subsidiaries at cost, less any impairment for permanent diminution in value. The cost of acquisition includes directly attributable professional fees and other expenses incurred in connection with the acquisition.
REVENUE
Finance revenue
Finance revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial assets and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Leasing
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Provision for restoration and rehabilitation
A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of removing the facilities and restoring the affected areas.
SEGMENT REPORTING
A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.
MERGER RESERVE
The difference between the fair value of an acquisition and the nominal value of the shares allotted in a share exchange has been credited to a merger reserve account, in accordance with the merger relief provisions of the Companies Act 1985 and accordingly no share premium for such transactions is set-up
SHARE BASED PAYMENTS
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The equity-settled share-based payments are expensed to the income statement over a straight line basis over the vesting period based on the Group's estimate of shares that will eventually vest. The fair value is determined using a Black-Scholes model which is then discounted to take into account the lack of marketability of the options (where applicable), and the inherent limitations of the Black-Scholes model..
Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of goods and services received, except where it is in respect to costs associated with the issue of securities, in which case it is charged to the share premium account.
3. FINANCIAL INSTRUMENTS - RISK MANAGEMENT
The Group's financial instruments grouped together by class and category are as follows.
| Loans and Receivables | ||
| 2008 | 2007 | |
| £'000 | £'000 | |
| Current financial assets | ||
| Trade and other receivables | 93 | 65 |
| Cash and cash equivalents | 2,720 | 1,638 |
| Total | 2,813 | 1,703 |
| Financial Liabilities Measured at Amortised Cost | ||
| 2008 | 2007 | |
| £'000 | £'000 | |
| Current financial liabilities | ||
| Other payables | 205 | 164 |
| Total | 205 | 164 |
Carrying value of the financial assets in the balance sheet is equal to the maximum exposure to credit risk.
The Group is exposed through its operations to the following financial risks:
- Foreign exchange risk
- Interest rate risk
- Liquidity risk
- Credit risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
- trade receivables
- cash at bank
- trade and other payables
- loans with related parties
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The Board receives regular reports from the Group's management through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
Management review the Group and Company's exposure to currency risk, interest rate risk, liquidity risk and credit risk on a regular basis and consider that through this review they manage the exposure of the Group and Company.
3. FINANCIAL INSTRUMENTS - RISK MANAGEMENT
The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below.
No formal policies have been put in place in order to hedge the Group and Company's activities to the exposure to currency risk or interest risk.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in Australia, whose functional currency is not the same as the functional currency in which the Head Company operates and raises finance. The Group's net assets arising from such overseas operations are exposed to currency risk resulting in gains or losses on retranslation into sterling.
Only in exceptional circumstances will the Group consider hedging its net investments in overseas operations as generally it does not consider that the reduction in foreign currency exposure warrants the cash flow risk created from such hedging techniques.
The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency or US dollar with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them) cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.
At the balance sheet date the Group had trade payables of £66,000 (2007 - £102,000) denominated in Australian dollars. There is no significant difference between the carrying value and fair value of the payables.
Interest Rate Risk
The Group and Company manage the interest rate risk associated with the Group cash assets by ensuring that interest rates are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits, whilst managing the access the Group requires to the funds for working capital purposes.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Short term payables are classified as those payables that are due within 30 days.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 45 days.
The Board receives 12-month cash flow projections as well as information regarding cash balances. At the balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
Trade and other receivables are stated initially at fair value and subsequently at amortised cost (using effective interest rate) less allowance for impairment.
Capital Disclosures
The Group considers its capital to comprise its ordinary share capital, share premium and accumulated retained losses as well as the reserves (consisting of share based payments reserve, foreign currency translation reserve and merger reserve).
The Group's objectives when maintaining capital is:
- to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.
The Company meets its capital needs by equity financing. The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
The Company and Group do not have any derivative instruments or hedging instruments. It has been determined that a sensitivity analysis will not be representative of the Company's and Group's position in relation to market risk and therefore, such an analysis has not been undertaken.
Credit Risk
Cash is the only significant concentration of risk. This risk is managed by only banking with reputable financial institutions.
Critical Accounting Estimates and Judgements
The company and group make certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
4. REVENUE AND SEGMENTAL INFORMATION
The Group had no operating revenue during the period.
The Group operates in one business segment, the exploration and evaluation of coal. The Group has material interests in two geographical segments, Australia and the United Kingdom. The Group assets are substantially attributable to the exploration and evaluation of coal activities in Australia. The parent Company operates a head office based in the United Kingdom which incurred certain administration and corporate costs.
Segment revenue and segment result
| Segment revenue | Segment result | |||
| Continuing operations | 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 |
| Australia | - | - | (42) | (2) |
| United Kingdom | - | - | (782) | (1,037) |
| - | - | (824) | (1,039) | |
| Interest revenue | 58 | 29 | ||
| Loss before tax | (766) | (1,010) | ||
| Income tax expense | - | - | ||
| Loss after tax | (766) | (1,010) | ||
Segment assets and liabilities
| Assets | Liabilities | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Australia | 5,016 | 2,996 | 68 | 102 |
| United Kingdom | 2,872 | 1,709 | 137 | 62 |
| Total of all segments | 7,888 | 4,705 | 205 | 164 |
Other segment information
| Depreciation and amortisation | Additions to non-current assets | |||
| Continuing operations | 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 |
| Australia | - | - | 1,624 | 619 |
| United Kingdom | 18 | 1 | 59 | 5 |
| 18 | 1 | 1,683 | 624 | |
5. LOSS FROM OPERATIONS
|
| Group | Company | ||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| This has been arrived at after charging/(crediting): | ||||
| Auditors' remuneration - audit services | 17 | 13 | 12 | 10 |
| - non audit services | 6 | 7 | - | 2 |
| Depreciation | 18 | 1 | 18 | 1 |
| Staff costs (Note 7) | 184 | 166 | 184 | 166 |
| Directors' share based payments | - | 175 | - | 175 |
| Share based payments expense | - | 189 | - | 189 |
| Other administrative expenses | 599 | 488 | 567 | 495 |
| Total operating expenses | 824 | 1,039 | 781 | 1,038 |
Auditors remuneration for audit services above includes £5,000 (2007: £3,000) charged by Deloitte Touche Tohmatsu relating to the audit of the subsidiary companies, and £6,000 (2007: £5,000) for corporate advisory.
6. INTEREST INCOME
|
| Group | Company | ||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Bank interest received / receivable | 58 | 29 | 58 | 29 |
7. STAFF COSTS (INCLUDING DIRECTORS)
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Salaries and fees | 396 | 331 | 298 | 268 |
| Social security costs | 2 | - | - | - |
| Reallocation to Intangible/Intercompany | (214) | (157) | (114) | (94) |
| Reallocation to cost of capital | - | (8) | - | (8) |
| Salaries expense | 184 | 166 | 184 | 166 |
| Share based payments | - | 175 | - | 175 |
| Total | 184 | 341 | 184 | 341 |
The Consolidated Group had 6 employees during the period ended 30 June 2008 (2007: 5 employees). All employees are Directors of the Company. Refer to the below table for each directors emoluments
| Director Fees | Options Issued | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Non-Executive Directors | ||||
| Norman Kennedy (1) | 24 | 24 | - | 35 |
| Phillip Sutherland | 27 | 14 | - | - |
| Michael Zheng | 4 | - | - | - |
| Executive Directors | ||||
| Anthony Samaha | 82 | 60 | - | 35 |
| Christopher Schrape | 115 | 87 | - | 43 |
| Christopher Lambert (2) | 144 | 146 | - | 62 |
| 396 | 331 | - | 175 | |
(1) Services provided by Rank Geological Services Pty Limited
(2) Services provided by Walkerton Limited
Mr C Schrape received £2,000 (2007: £Nil) in pension benefits. No other pension benefits were provided to Directors.
8. LOSS PER SHARE
The loss for the period attributed to shareholders is £766,000 (2007: Loss £1,010,000).
This is divided by the weighted average number of Ordinary shares outstanding calculated to be 294.2 million (2007: 245.7 million) to give a basic loss per share of 0.26p (2007: basic loss per share of 0.41p).
As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered be to anti-dilutive and, as such, a diluted loss per share is not included.
9. INCOME TAX
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Current year taxation | ||||
| UK Corporation tax at 28% - 30% on results for the period (2007: 30%) | ||||
| Factors affecting the tax charge for the year | ||||
| Loss on ordinary activities before tax | (766) | (1,010) | (723) | (1,009) |
| Loss on ordinary activities at the UK standard rate of 28% - 30% (2007: 30%) | (226) | (303) | (213) | (303) |
| Effects of: | ||||
| Non deductible expenses | - | 110 | - | 110 |
| Future tax benefit not brought to account | 226 | 193 | 213 | 193 |
| Total tax charge for the period | - | - | - | - |
No deferred tax asset has been recognised because there is insufficient evidence of the timing of suitable future profits against which they can be recovered.
The value of Group deferred tax asset that is unrecognised in the accounts is £2,041,000 (2007: £1,183,000) and for the Company is £471,000 (2007: £288,000). The deferred tax has been calculated using a corporate tax rate of 28% (2007: 30%), which is the rate that has been legislated for accounting periods commencing in 2008.
10. INTANGIBLE ASSETS
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Exploration and evaluation | ||||
| Cost | ||||
| At beginning of period | 2,957 | 2,361 | - | - |
| Additions | 1,622 | 619 | - | - |
| Currency translation adjustment | 408 | (23) | - | - |
| Carrying Value at 30 June | 4,987 | 2,957 | - | - |
The Directors undertook an impairment review as at 30 June 2008 and as a result of this review no provision was required.
11. PLANT AND EQUIPMENT
| Group £'000 | Company £'000 | |
| Cost | ||
| Opening balance at 1 July 2006 | 3 | 3 |
| Additions | 5 | 5 |
| At 30 June 2007 | 8 | 8 |
| Additions | 61 | 59 |
| At 30 June 2008 | 69 | 67 |
| Depreciation | ||
| Opening balance at 1 July 2006 | 1 | 1 |
| Depreciation charge for the period | 1 | 1 |
| At 30 June 2007 | 2 | 2 |
| Depreciation charge for the year | 18 | 18 |
| At 30 June 2007 | 20 | 20 |
| Net book value | ||
| At 30 June 2008 | 49 | 47 |
| At 30 June 2007 | 6 | 6 |
12. INVESTMENTS
UNLISTED INVESTMENTS
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Cost | ||||
| Investments in subsidiaries (i) | - | - | - | - |
(i) The investment in subsidiaries is for £2 (2007: £2).
Subsidiaries of Altona Resources Plc
| Entity | Country of Registration | Holding | Nature of Business | |
| 2007 % | 2006 % | |||
| Direct | ||||
| Altona Australia Pty Limited | Australia | 100 | 100 | Holding Company |
| Indirect | ||||
| Arkaringa Energy Pty Limited | Australia | 100 | 100 | Evaluation of the Arckaringa Project Project and Evaluation |
13. TRADE AND OTHER RECEIVABLES
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Current trade and other receivable | ||||
| Other receivables (i) | 52 | 46 | 32 | 20 |
| Prepayments and accrued income | 41 | 19 | 41 | 19 |
| 93 | 65 | 73 | 39 | |
| Non current trade and other receivable | ||||
| Rent deposit (iii) | 36 | 36 | 36 | 36 |
| Tenement bond | 3 | 3 | - | - |
| 39 | 39 | 36 | 36 | |
(i) Other receivables are non interest bearing and generally repayable between 30-60 days.
(ii) The receivables from wholly owned subsidiaries are non interest bearing and are due at call.
(iii) Rent deposit accrues interest at the 2.8% and is refundable upon completion of the lease property.
14. LOANS TO SUBSIDIARIES
| Company | ||||
| 2008 £'000 | 2007 £'000 | |||
| Altona Australia Pty Limited | 2,348 | 2,063 | ||
| Arkaringa Energy Pty Limited | 2,678 | 858 | ||
| At 30 June | 5,026 | 2,921 | ||
The loans to subsidiaries are interest free and have no fixed repayment date. Both balances are denominated in Australian Dollars and are repayable on demand.
15. TRADE AND OTHER PAYABLES
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Trade creditors | 187 | 139 | 119 | 37 |
| Accruals and other creditors | 18 | 25 | 18 | 25 |
| 205 | 164 | 137 | 62 | |
Trade and other creditors are non interest bearing and are normally settled on terms of 30 days from month end.
16. SHARE CAPITAL
Authorised
| 1,000,000,000 Ordinary shares of 0.1p each (2007: 1,000,000,000) | 1,000 | 1,000 | 1,000 | 1,000 |
Allotted, called up and fully paid
| 358,165,784 ordinary shares of 0.1p each (2007: 283,165,784) | 358 | 283 | 358 | 283 |
During the period the Company issued the following Ordinary 0.1 pence fully paid shares for cash:
| Date | Issue Price | Number of Shares | Nominal Value £'000 |
| 1 July 2007 | Opening balance | 283,165,784 | 283 |
| 29 February 2008 | Placing at 4.75p per share | 22,000,000 | 22 |
| 6 June 2008 | Placing at 4.85p per share | 53,000,000 | 53 |
| 358,165,784 | 358 |
Share options and warrants
During the period, Nil options or warrants to subscribe for ordinary shares in the Company were issued (2007: 26,000,000).
As at 30 June 2008 the options and warrants in issue were:
| Exercise Price | Expiry Date | Options in Issue 30 June 2008 | Options in Issue 30 June 2007 |
| 1.00p | 10 March 2010 | 1,750,000 | 1,750,000 |
| 8.00p | 2 August 2011 | 3,000,000 | 3,000,000 |
| 12.00p | 2 August 2011 | 3,000,000 | 3,000,000 |
| 16.00p | 2 August 2011 | 3,000,000 | 3,000,000 |
| 7.00p | 12 October 2011 | 6,000,000 | 6,000,000 |
| 10.00p | 12 October 2011 | 5,000,000 | 5,000,000 |
| 14.00p | 12 October 2011 | 3,000,000 | 3,000,000 |
| 4.75p | 23 April 2012 | 1,500,000 | 1,500,000 |
| 9.50p | 23 April 2012 | 1,500,000 | 1,500,000 |
| 27,750,000 | 27,750,000 | ||
No options lapsed or were cancelled and no options were exercised during the period
17. SHARE BASED PAYMENTS
The assessed fair value at the grant date has been determined using the Black-Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
Directors Options
In the prior year, the Company granted options to Directors as tabled below. Under IFRS 2 'Share Based Payments', the Company determines the fair value of options issued to Directors as remuneration and recognises the amount as an expense in the income statement with a corresponding increase in equity.
| Date Granted | Number | Exercise Price | Expiry Date | Fair Value per Option | Fair Value £'000 |
| 13/10/2006 | 6,000,000 | 7p | 12/10/2011 | 1.6p | 96 |
| 13/10/2006 | 5,000,000 | 10p | 12/10/2011 | 1.1p | 55 |
| 13/10/2006 | 3,000,000 | 14p | 12/10/2011 | 0.8p | 24 |
| 14,000,000 | 175 |
The fair value of the options granted to Directors during the period was £175,000. The key inputs applied to the Black-Scholes Model included: the closing share price on 13 October 2006 of 6.6p; risk free interest rate of 4.79%; and expected volatility of 0.40. In accessing the fair value of the options, a discount of 40% has been applied to the theoretical value calculated by the Black-Scholes Model to take into account the lack of marketability of the options and the inherent limitations of the Black-Scholes Model.
Warrants to Royal Bank of Scotland
In the prior year, the Company granted warrants to Royal Bank of Scotland (RBS) as tabled below. The expense in respect to these options was charged to the financing fees in the income statement.
| Date Granted | Number | Exercise Price | Expiry Date | Fair Value per Option | Fair Value £'000 |
| 03/08/2006 | 3,000,000 | 8p | 12/10/11 | 2.7p | 81 |
| 03/08/2006 | 3,000,000 | 12p | 12/10/11 | 1.9p | 57 |
| 03/08/2006 | 3,000,000 | 16p | 12/10/11 | 1.7p | 51 |
| 9,000,000 | 189 |
The fair value of the warrants granted to RBS during the period was £189,000. The key inputs applied to the Black-Scholes Model included: the closing share price on 3 August 2006 of 9.4p; risk free interest rate of 4.80%; and expected volatility of 0.40. In accessing the fair value of the options, a discount of 40% has been applied to the theoretical value calculated by the Black-Scholes Model to take into account the lack of marketability of the options and the inherent limitations of the Black-Scholes Model.
Options to Matrix Corporate Capital Limited
In the prior year, the Company granted options to Matrix Corporate Capital Limited (Matrix) as tabled below. The expense in respect to these options was charged to the share premium account.
| Date Granted/ Vested | Number | Exercise Price | Expiry Date | Fair Value per Option | Fair Value £'000 |
| 24/04/2007 | 1,500,000 | 4.75p | 23/04/12 | 1.4p | 21 |
| 24/04/2007 | 1,500,000 | 9.50p | 23/04/12 | 0.7p | 11 |
| 3,000,000 | 32 |
The fair value of the options granted to Matrix during the period was £32,000. The key inputs applied to the Black-Scholes Model included: the closing share price on 24 April 2007 of 5.2p; risk free interest rate of 5.21%; and expected volatility of 0.40. In accessing the fair value of the options, a discount of 40% has been applied to the theoretical value calculated by the Black-Scholes Model to take into account the lack of marketability of the options and the inherent limitations of the Black-Scholes Model.
18. FINANCIAL INSTRUMENTS
The Group uses financial instruments comprising cash, liquid resources and debtors/creditors that arise from its operations. The Group holds cash as a liquid resource to fund the obligations of the Group. The Group's cash balances are held in Sterling and in Australia Dollars. The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure. This is achieved by regular monitoring of interest rates and monthly review of expenditure forecasts.
The Company has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk, however it does review its currency exposures on an ad hoc basis. Currency exposures relating to monetary assets held by foreign operations are included within the foreign exchange reserve in the Group Balance Sheet.
The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.
To date the Group has relied upon equity funding to finance operations. The Directors are confident that adequate cash resources exist to finance operations to commercial exploitation but controls over expenditure are carefully managed.
The net fair value of financial assets and liabilities approximates the carrying values disclosed in the financial statements. The currency and interest rate profile of the financial asset is as follows:
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Sterling | 2,715 | 1,627 | 2,715 | 1,627 |
| Australian Dollars | 5 | 11 | - | - |
| At 30 June | 2,720 | 1,638 | 2,715 | 1,627 |
The financial assets comprise cash balances in interest earning bank accounts at call. The financial assets in Sterling currency earn interest at 30 June 2008 of 5.48% (2007: 5.64%).
19. COMMITMENTS
As at 30 June 2008, the Group had entered into the following material commitments:
Exploration commitments
Ongoing exploration expenditure is required to maintain title to the Group's mineral exploration permits, with minimum expenditure of approximately £169,000 per annum required. No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the operations of the Group.
Operating lease commitments
Leasing arrangements
Operating leases relate to office facilities. The Company entered into a 5 year lease with a break clause after 3 years. The lease was entered into jointly, with Braemore Resources Plc (Refer Note 20). The below numbers represent the total lease commitments for the office facility.
| Group | Company | |||
| 2008 £'000 | 2007 £'000 | 2008 £'000 | 2007 £'000 | |
| Non-cancellable operating lease payments | ||||
| Not longer than one year | 83 | 83 | 83 | 83 |
| Longer than one year and not longer than five years | 62 | 145 | 62 | 145 |
| 145 | 228 | 145 | 228 | |
20. RELATED PARTY TRANSACTIONS
During the period the subsidiary company Arckaringa Energy Pty Ltd paid geological consultancy fees and expenses reimbursements of £72,000 (2007: £36,000) to Rank Geological Services Pty Ltd, a company related to Norman Kennedy, Director of Altona Resources Plc. This amount was paid under a management agreement dated 18 November 2005 forming part of an agreement to transfer Arckaringa coalfield tenements EL 3360, 3361, and 3362. At 30 June 2008 £7,000 (2007: £13,000) of the total balance was outstanding.
During the period, the subsidiary company Arckaringa Energy Pty Ltd paid rent and other administrative expenses of £8,000 (2007: £Nil) to PepinNini Minerals Limited, a company related to Norman Kennedy. At 30 June 2008, there was £Nil owing (2007: £Nil).
The Company has entered into a joint lease of office facilities with Braemore Resources Plc, a related party due to common Directors. At 30 June 2008, there was £Nil owing to/from Braemore Resources Plc (2007: £Nil).
21. POST BALANCE SHEET EVENTS
Subsequent to 30 June 2008, the Company has issued 24,750,000 options to Directors and employees/consultants. The financial impact resulting from the issue of these options has not been recorded within the financial statements.
22. CONTINGENT LIABILITIES
In a prior financial period, the Group acquired the subsidiary Arckaringa Energy Pty Ltd. At that time Arckaringa Energy Pty Ltd was the holder of three exploration licences in South Australia. The Group obtained advice that this acquisition could be assessed as not subject to the land rich stamp duty provisions relating to South Australian property. Revenue SA has been reviewing this acquisition and has advised the Group that it intends to issue an assessment that the acquisition was land rich. At the date of these accounts, the Group has not yet received an assessment.
The advice provided to the Group indicates that should stamp duty ultimately be payable it may amount to AUD$252,000 (GBP £123,000).
In the event that an additional stamp duty payment is required the amount paid would represent an increase in the amount recognised as capitalised exploration and evaluation expenditure.
The Group has not recognised a liability in connection to additional stamp duty as the Directors believe that no further stamp duty is payable in connection to this matter, based on advice received at the time of acquisition, and in the absence of further details from Revenue SA.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of ALTONA RESOURCES PLC (the "Company") will be held at Hilton London Green Park (Blake Room 2), Half Moon Street, Mayfair, London W1J 7EN on 19 December 2008 at 10.30 a.m. for the purpose of considering and, if thought fit, passing the following resolutions which will be proposed as ordinary resolutions in the case of resolutions 1, 2, 3, 4 and 5 and as special resolutions in the case of resolutions 6 and 7.
ORDINARY BUSINESS
1 To receive and adopt the financial report of the Company, together with the directors' report and the auditors report for the year ended 30 June 2008.
2 To re-elect Zheng (Michael) Qiang appointed during the year and retiring as a director in accordance with the Articles of Association of the Company at the conclusion of the meeting and, being eligible, offering himself for re-election as a director of the Company.
3 To re-elect as a director of the Company Norman Lee Kennedy, who retires by rotation under the Articles of Association of the Company and, being eligible, offers himself for re-election.
4 To re-appoint Chapman Davis LLP as auditors of the Company to act until the conclusion of the next Annual General Meeting and to authorise the Directors to determine their remuneration.
ORDINARY RESOLUTION
5 That in substitution for all existing authorities under the following section to the extent unutilised, the Directors be generally and unconditionally authorised pursuant to Section 80 of the Companies Act 1985 (the "Act") to allot relevant securities (within the meaning of that section) up to an aggregate nominal amount of £250,000. The authority referred to in this resolution shall be in substitution for all other existing authorities, and shall expire (unless previously renewed, varied or revoked by the Company in general meeting) at the earlier of the next Annual General Meeting of the Company and the date falling 15 months following the date of the Extraordinary General Meeting being convened by this Notice. The Company may, at any time prior to the expiry of the authority, make an offer or agreement which would or might require relevant securities to be allotted after the expiry of the authority and the Directors are hereby authorised to allot relevant securities in pursuance of such offer or agreement as if the authority had not expired.
SPECIAL RESOLUTIONS
6 That in substitution for all existing authorities to the extent unutilised, the Directors, pursuant to Section 95 of the Act, be empowered to allot equity securities (within the meaning of Section 94(2) of the Act) for cash pursuant to the authority conferred by Resolution 5 as if Section 89(1) of the Act did not apply to any such allotment provided that this power shall be limited to:
(a) the allotment of equity securities where such securities have been offered (whether by way of a rights issue, open offer or otherwise) to the holders of ordinary shares in the capital of the Company in proportion (as nearly as may be) to their holdings of such ordinary shares but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with equity securities representing fractional entitlements and with legal or practical problems under the laws of, or the requirements of, any regulatory body or any stock exchange in, any territory; and
(b) the allotment, other than pursuant to (a) above, of equity securities:
(i) arising from the exercise of options and warrants outstanding at the date of this resolution;
(ii) pursuant to one or more placings of equity securities by the Company for cash to raise up to £8,002,500 (in aggregate); and
(iii) other than pursuant to (i) and (ii) above, up to an aggregate nominal value of £75,000, and this power shall, unless previously revoked or varied by special resolution of the Company in general meeting, expire at the earlier of the conclusion of the next Annual General Meeting of the Company and the date falling 15 months following the date of the Extraordinary General Meeting being convened by this Notice. The Company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted after such expiry and the Directors are hereby empowered to allot equity securities in pursuance of such offers or agreements as if the power conferred hereby had not expired.
7 That the name of the Company be changed to "Altona Energy plc".
If you are a registered holder of Ordinary Shares in the Company, whether or not you are able to attend the meeting, you may use the enclosed form of proxy to appoint one or more persons to attend and vote on a poll on your behalf. A proxy need not be a member of the Company.
A form of proxy is provided.
This may be sent by facsimile transfer to 01252 719 232 or by mail to:
The Company Secretary
Altona Resources Plc
c/o Share Registrars Limited
Suite E
First Floor
9 Lion & Lamb Yard
Farnham
Surrey GU9 7LL
In either case, the signed proxy must be received no later than 48 hours (excluding any part of a day which is not a working day) before the time of the meeting, or any adjournment thereof.
By Order of the Board Registered office:
Third Floor
Stephen Ronaldson 55 Gower Street
Company Secretary London WC1E 6HQ
26 November 2008
Notes to the Notice of General Meeting
Entitlement to attend and vote
1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the Company's register of members 48 hours before the time of the Meeting shall be entitled to attend and vote at the Meeting.
Appointment of proxies
2. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
3. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the registrars of the Company, Share Registrars Limited on 01252 821 390.
5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
Appointment of proxy using hard copy proxy form
6. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.
To appoint a proxy using the proxy form, the form must be:
completed and signed;
sent or delivered to Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, Farnham, Surrey GU9 7LL or by facsimile transmission to 01252 719 232; and
received by Share Registrars Limited no later than 48 hours (excluding any part of a day which is not a working day) prior to the Meeting.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form.
Appointment of proxy by joint members
7. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding (the first-named being the most senior).
Changing proxy instructions
8. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact Share Registrars Limited on 01252 821 390.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
Termination of proxy appointments
9. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods:
By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, Farnham, Surrey GU9 7LL or by facsimile transmission to 01252 719 232. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice.
In either case, the revocation notice must be received by Share Registrars Limited no later than 48 hours (excluding any part of a day which is not a working day) prior to the Meeting.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
Corporate representatives
10. In order to facilitate voting by corporate representatives at the Meeting, arrangements will be put in place at the Meeting so that:
(i) if a corporate member has appointed the Chairman of the Meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all the other corporate representatives for that member at the Meeting, then, on a poll, those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and
(ii) if more than one corporate representative for the same corporate member attends the Meeting but the corporate member has not appointed the Chairman of the Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative.
Corporate members are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives - www.icsa.org.uk
- for further details of this procedure. The guidance includes a sample form of representation letter to appoint the Chairman as a corporate representative as described in (i) above.
Issued shares and total voting rights
11. As at 26 November 2008, the Company's issued share capital comprised 358,165,784 ordinary shares of £0.001 each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 26 November 2008 is 358,165,784.