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Excerpt from Final Report 2012 05-Nov-2012

5 November 2012

Creat Resources Holdings Limited

("CRHL" or "the Company")
Final Results for year ended 30 June 2012

 

Creat Resources Holdings Limited ("CRHL") (AIM: CRHL) is pleased to announce its final results for the year ended 30 June 2012 as shown below. The full Annual Report and Accounts will be available on the Company’s website (www.creatresources.com) shortly.

 

The notice of the Annual General Meeting and posting of the Annual Report and Accounts will be announced in due course.

 

For further information please visit www.creatresources.com or contact:

 

Creat Resources Holdings Limited

Morris R. Hansen, Company Secretary: Tel +613 6471 6228

 

Daniel Stewart & Company

Paul Shackleton, Emma Earl, Jamie Barklem: Tel +44 20 7776 6550

 

 

 

Chairman’s Statement

 

Dear Shareholders:

 

I am pleased to present to you the Annual Report of Creat Resources Holdings Limited for the year ended 30 June 2012.

 

The year just ended was, and the year ahead will be, filled with challenges. The European financial crisis deepening, rather than easing; the American economy remaining sluggish and the slowing down of developing countries, all contributed to the weak demand for lower end resources. Extraction of resources from our tenements would only be economically viable when such situations dramatically improve, and the low commodity prices rebound.

 

During the year, as with other similar exploration companies, development at Creat Resources had been hindered by the shortage of working capital. The financial crisis worldwide made it difficult, if at all possible, to raise funds from the capital market. Despite the support we received from our major shareholder, Creat Group Company Limited, we have no alternative but to keep our exploration work to a level we could manage to best balance input and output.

 

Towards the end of the financial year, your Board of Directors reconsidered the way forward for our exploration activities. By now, you would note that the Board has recommended for your approval the disposal of all the tenements we hold at Zeehan, Tasmania, Australia. By such move, I trust that it allows your Company to start afresh. Myself, and the rest of the Board, have long begun our search for new and even better opportunities to enhance the return on your investment.

 

At the same time, our other major investment in Galaxy Resources Limited has made milestone progress. In March 2012, Jiangsu Lithium Carbonate Plant which is wholly owned by Galaxy and situated in the Zhangjiagang Free Trade Zone in China’s Jiangsu Province was officially opened. Jiangsu Plant is the largest-capacity battery grade lithium carbonate plant in the Asia Pacific region and is one of the most technologically advanced plants of its kind in the world.

 

Also in March 2012, Galaxy announced the merger with Lithium One Inc., Canada, which when completed, resulted in Galaxy becoming a much larger lithium resource supplier worldwide demonstrating Galaxy’s understanding of the importance of this strategic green energy source. Following the merger, the effective shareholding of Galaxy by Creat Resources was inevitably diluted but we remain one of the substantial shareholders of Galaxy, leaving us, CRHL, set to realize a high return on our investment when the potential of Galaxy is unleashed.

 

Please join me in expressing our gratitude to the Board, the management team and all the staff, in this time of challenge, their dedication is the envy of our competitors.

 

We thank you for, and we look forward to receiving, your continuing support for a brighter future for your company.

 

Derek Leung

Executive Chairman

 

 

 

 

 

 

Excerpts from Directors report

 

Principal activities

 

The principal activities of the Consolidated Entity during the financial year were minerals exploration and the acquisition, exploration and operation of mineral properties in both Australia and overseas.

 

The Company was admitted to trading on AIM on 6 March 2007. The Company initially focused on zinc, lead and silver deposits in Western Tasmania, Australia. Since July 2009 the Company has pursued a strategy of acquisitions and other transactions that has resulted in expansion of its mining operations within and outside Australia and resource diversification (including gold, nickel, and a continued focus on lead, zinc and silver) in order to spread the risk of commodity fluctuations and take advantage of the deals on offer.

 

Operating results

 

The loss of the Consolidated Entity for the year after providing for income tax amounted to $13,673,981 (2011 loss: $20,439,089).

 

Review of operations

 

The Company is pursuing a dual strategy of acquiring interests in strategic resource companies, the first of which is Galaxy Resources Limited, and resource diversification through its exploration activities.

 

Galaxy Resources Ltd Investment

Galaxy Resources Limited (“Galaxy”) is a Western Australian S&P / ASX 300 Index company which plans to become one of the world’s leading producers of lithium compounds – the essential component for powering the world’s fast expanding fleet of hybrid and electric cars. Galaxy’s Mt Cattlin mine aims to be the world’s second largest producer of lithium mineral concentrate globally, and through the development of its 17,000 tpa lithium carbonate plant in Jiangsu province, Galaxy expects to be one of the largest and lowest cost lithium compound producers in China. Lithium compounds such as lithium carbonate are forecast to be in short supply against high future demand due to advances in long life batteries and sophisticated electronics including mobile phones and computers. Galaxy has positioned itself to meet this lithium future by not only mining the lithium, but also by downstream processing to supply lithium carbonate to the expanding Asian market.

 

The Company’s shareholding in Galaxy remains at 38,091,616 shares. Whilst there has been no change in the number of shares held by the Company during the reporting period, as a result of the placement of shares to raise capital for the financing of the merger of Lithium One of Canada and Galaxy Resources, the Company’s holding was diluted and is 10.45% as at 30 June 2012.

 

Mt Cattlin

Mt. Cattlin production continued throughout the year until July 2012 when Galaxy announced a temporary halt to production due to the large stockpiles of ore destined to Jiangsu plant in China which was in its early stages of ramping up to full production. It is expected that production at Mt. Cattlin will continue once Jiangsu is near full production.

 

Jiangsu Lithium Carbonate Project in Jiangsu, PRC.

The Jiangsu Lithium Carbonate plant continues to progress with lithium carbonate production in August totalling 350 tonnes, (25% of design output), slightly ahead of the ramp-up schedule according to the Galaxy announcement in September 2012.

 

Galaxy announced that August sales totalled 268 tonnes generating revenue in excess of A$1.6 million (RMB10.5 million) for the month. Galaxy commenced battery grade lithium carbonate sales with overall product acceptance. August sales were still based predominantly on technical grade product. Going forward, battery grade sales revenue is expected to increase as more customer product qualifications are completed.

 

Battery grade lithium carbonate samples were sent to over 30 potential customers in China for product qualification. Product testing continues and feedback regarding product quality to date has been extremely positive according to Galaxy.

 

Product quality at Jiangsu continues to achieve at least the 99.5% purity criteria required to class the lithium carbonate as battery grade, with the product meeting all of the prescribed tolerances for impurities required by Galaxy’s cathode producing customers.

 

Exploration Activities

 

This section should be read in conjunction with the Subsequent Events note and in note 33 to the financial statements.

 

Retention Licences

Creat Resources Holdings Limited (“CRHL”) and its wholly owned subsidiary, ZZ Exploration Pty Ltd, hold three (3) Retention Licences (RL) as a portion of its tenement package situated in the mineral rich area around Zeehan in Western Tasmania. Re-assessment of the existing mineral resources and development of programs to increase reserves and/or extract ore grade material for all three licences has been ongoing over the last 12 months. Selective rehabilitation is being completed at the Comstock mine site and surrounding works in consultation with the EPA of Tasmania.

 

Comstock

RL4/2009 Comstock was granted on 01/02/2010 for an initial period of 2 years. This term was extended for a further 2 years and will expire on the1st February 2014 unless extended.

 

Mineral Resources Tasmania (MRT) has for several years held an environmental bond of $2.5 million from CRHL to cover the decommissioning and rehabilitation of the Comstock site. Further to this, CRHL will be entitled to reimbursement in full, of the bond amount, upon successful completion of the decommissioning and rehabilitation process.

 

Environmental Protection Notice (EPN) 7977/1 states that CRHL must develop and implement a Decommissioning and Rehabilitation Plan (DRP) for the site. A draft DRP has been developed by CRHL and has been submitted to the Environment Protection Authority (EPA) for review. This was done in September 2011. The current version of the DRP resides with the EPA. The version as it exists is only partially acceptable to the EPA and CRHL has been informed that further work is required for resubmission of the DRP after addressing the issues of concern to the EPA.

 

Minimal rehabilitation work was completed during the year. A clay deposit was located and samples taken for analysis. The samples were analysed and now require review by an environmental consultant to report on the soil compatibility for the purposes required by the EPA in the capping of the Swansea Waste Rock dump and the now partially infilled dirty water dam.

 

Quarterly water quality testing continues as well as continuous lime dosing to maintain water quality control on site as per our obligations with regard to the site and the EPA.

 

Oceana

RL3/2009 Oceana was granted on 01/02/2010 for an initial period of 2 years. An application was made and granted for an extension of term. This licence now expires on the 1st February 2014 unless extended.

 

There has been no development activity in the 12 months to 30 June 2012, however, quarterly water quality control samples continue to be carried out and assessment of the mineral resource potential continues.

 

Mariposa

There has been no development activity in the 12 months to 30 June 2012. Retention Licence RL1/2008 was renewed in February 2011 for a further period of 2 years, with the term of the licence extending until 1st February 2013.Continued assessment of the mineral resource potential was carried out during the term.

 

Exploration Licences

CRHL with its wholly owned subsidiary, ZZ Exploration Pty Ltd holds four (4) current and active Exploration Licences (EL) in the Zeehan area covering a total area of 109 square kilometres. Geological work programs, including drilling were completed on the various tenements during the year ended 30 June 2012.

 

EL30

The primary focus at EL30/2002, Tenth Legion Prospect has been to evaluate the extent and quality of the long-known magnetite mineralisation present to determine the suitability as a Direct Shipping Ore (DSO). This work continues and will require further drilling to delineate a resource. Work was also undertaken to determine the continuity of strike from Comstock to the southeast of the RL within EL30 during the year with two of three planned diamond drill holes being completed. SY159 & SY160 were drilled to completion during the period. SY159 Intersected one minor mineralised zone at depth and SY160 intersected two minor mineralised zones. The results did not warrant the completion of the third diamond hole planned further to the southeast.

 

Table 1 – Collar Information

Hole No.

Easting

Northing

Azimuth

Dip

Depth

SY159

359008

5360418

205

-50

213.6

SY160

359235

5360354

205

-50

244.6

 

EL20

 

Two further diamond drill holes, AU002 and AU003 were completed during the period as a follow-up to AUD001 drilled in the previous year. AU002 was designed to test the continuity of the mineralised zone confirmed in AU001. AU002 was drilled to the northeast and from the opposite side of the structure as AU001. The results confirmed the extension of a broad low grade mineralised zone from AU001. A fourth diamond hole, AU004 was planned approved and awaits drilling.

 

AU003 was designed to test a small historical zone above AU001. The drill results were disappointing and no further work was completed.

 

Table 2 – Collar Coordinates

Hole No

Easting

Northing

Azimuth

Dip

Depth

AU002

362271

5358975

250

-55

349.5

AU003

362036

5358886

250

-45

239.5

EL18

The geochemical grid was sampled during the period and the samples were subjected to onsite handheld XRF analysis. Results were mixed with no follow-up work planned in this area at present.

 

During the period it was decided to plan and carry out a diamond drilling program in the southeast corner of the northern block of EL18. This section is due west of Zinc mineralisation located in the south portion of the Tenth Legion prospect on EL30. Three diamond drill holes were planned of which one has been completed. These drill holes were planned to test the western extent of the Zinc mineralisation of previous drilling programs carried out on the adjacent EL30.

 

TLC44 was the first of the holes to be drilled and was completed at a depth of 201.9m. TLC43 and TLC45 are prepared, approved and await drilling.

 

EL21

The company has committed to reviewing the existing data relating to the two tin prospects within the tenement. A pre-JORC resource exists on the Razorback mine and work is ongoing with regard to planning and completing further exploration that could lead to an up grading of the resource to JORC compliance.

 

Consolidated statement of comprehensive income

 

 

 

 

Year Ended

 

Year Ended

 

 

 

30-Jun-12

 

30-Jun-11

 

 

Note

$

 

$

 

Continuing Operations

 

 

 

 

 

Revenue

6

275,196

 

211,627

 

Other Gains and Losses

7

(747,241)

 

(364,768)

 

Share of Loss of Associate

14

-

 

(5,108,536)

 

Exploration and Evaluation Costs Expensed

8

(325,448)

 

(1,374,883)

 

Depreciation Expense

8

(249,217)

 

(310,977)

 

Finance Costs

8

(9,693,129)

 

(6,746,616)

 

Administration Expenses

 

(682,945)

 

(547,557)

 

Employee Expenses

 

(1,372,422)

 

(2,878,924)

 

Site Operations

 

(105,537)

 

(117,942)

 

Site Operations - Environment

 

(605,083)

 

(2,999,835)

 

Other Expenses

 

(168,155)

 

(200,678)

 

Loss before Income tax

 

(13,673,981)

 

(20,439,089)

 

 

 

 

 

 

 

Income Tax Benefit

10

-

 

-

 

Loss for the Period

 

(13,673,981)

 

(20,439,089)

 

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

Share of Other Comprehensive Income of Associate

 

-

 

739,166

 

Other Comprehensive Income for the Period (Net of Tax)

 

-

 

-

 

Total Comprehensive Income for the Period

 

(13,673,981)

 

(19,699,923)

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

Basic (cents per share)

 

(2.05)

 

(3.06)

 

Diluted (cents per share)

 

(2.05)

 

(3.06)

 

 

The accompanying notes form part of these financial statements

 

 

Consolidated statement of financial position as at 30 June 2012


 

 

30 Jun 12

30-Jun-11

 

 

Note

 

$

$

 

Assets

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and Cash Equivalents

24

 

92,797

263,714

 

Trade and Other Receivables

11

 

61,269

28,043

 

Other Current Assets

12

 

103,497

126,542

 

Total Current Assets

 

 

257,563

418,299

 

 

 

 

 

 

 

Non-Current Assets

 

 

 

 

 

Property, Plant and Equipment

16

 

867,598

1,164,990

 

Exploration and Evaluation Asset

 

 

250,000

250,000

 

Investment in Associate

14

 

-

-

 

Other Non-Current Assets

15

 

22,283,595

28,568,712

 

Other Financial Assets

13

 

2,500,000

2,500,000

 

Total Non-Current Assets

 

 

25,901,193

32,483,702

 

 

 

 

 

 

 

Total Assets

 

 

26,158,756

32,902,001

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Trade and Other Payables

17

 

396,857

435,458

 

Financial Liabilities

18

 

43,605,795

32,533,017

 

Provisions

19

 

1,279,380

1,450,954

 

Total Current Liabilities

 

 

45,282,032

34,419,429

 

 

 

 

 

 

 

Non-Current Liabilities

 

 

 

 

 

Financial Liabilities

18

 

-

4,225,628

 

Provisions

19

 

1,610,136

1,316,375

 

Total Non-Current Liabilities

 

 

1,610,136

5,542,003

 

 

 

 

 

 

 

Total Liabilities

 

 

46,892,168

39,961,432

 

 

 

 

 

 

 

Net Liabilities

 

 

(20,733,412)

(7,059,431)

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

30 Jun 12

30-Jun-11

 

 

Note

 

$

$

 

Equity

 

 

 

 

 

Issued Capital

20

 

69,408,416

69,408,416

 

Reserves

21

 

344,531

344,531

 

Accumulated Losses

 

 

(90,486,359)

(76,812,378)

 

Equity attributable to owners of the Company

 

 

(20,733,412)

(7,059,431)

 

 

 

 

 

 

 

Total Deficiency

 

 

(20,733,412)

(7,059,431)

 

The accompanying notes form part of these financial statements

 

 

Consolidated statement of cash flows for the year ended 30 June 2012


 

 

30-Jun-12

 

30-Jun-11

 

 

Note

$

 

$

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

 

 

Receipts from Customers

 

99,369

 

137,772

 

Payments to Suppliers and Employees

 

(3,401,005)

 

(6,336,365)

 

Net Cash used in Operating Activities

24

(3,301,636)

 

(6,198,593)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

Purchase of Property, Plant & Equipment

 

-

 

(123,693)

 

Proceeds from Sale of Property, Plant & Equipment

 

145,427

 

-

 

Interest Received

 

142,601

 

220,857

 

Net Cash generated by Investment Activities

 

288,028

 

97,164

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

Interest Paid

 

(7,309)

 

(136,042)

 

Proceeds from Borrowings

 

2,850,000

 

3,882,666

 

Repayment of Borrowings

 

-

 

(378,588)

 

Net Cash generated by Financing Activities

 

2,842,691

 

3,368,036

 

 

 

 

 

 

 

Net Decrease in Cash and Cash Equivalents

 

(170,917)

 

(2,733,393)

 

Cash and Cash Equivalents at Beginning of the Period

 

263,714

 

2,997,107

 

Cash and Cash Equivalents at the End of the Period

24

92,797

 

263,714

 

 

The accompanying notes form part of these financial statements


 

Issued

Capital

 

Accumulated

Losses

 

Share of Associate's

Reserve

 

Other

Reserves

 

Total

 

 

$

 

$

 

$

 

$

 

$

 

Balance at 1 July 2010

69,408,416

 

(56,373,289)

 

462,415

 

344,531

 

13,842,073

Loss for the Period

-

 

(20,439,089)

 

-

 

-

 

(20,439,089)

Total comprehensive income for the period

-

 

(20,439,089)

 

-

 

-

 

(20,439,089)

Share of Associate's Reserves

-

 

-

 

739,166

 

-

 

739,166

Reclassification to AFS Investment

-

 

-

 

(1,201,581)

 

-

 

(1,201,581)

Balance at 30 June 2011

69,408,416

 

(76,812,378)

 

-

 

344,531

 

(7,059,431)

 

 

 

Issued

Capital

 

Accumulated

Losses

 

Share of Associate's

Reserve

 

Other

Reserves

 

Total

 

$

 

$

 

$

 

$

 

$

Balance at 1 July 2011

69,408,416

 

(76,812,378)

 

-

 

344,531

 

(7,059,431)

Loss for the Period

-

 

(13,673,981)

 

-

 

-

 

(13,673,981)

Total comprehensive income for the period

-

 

(13,673,981)

 

-

 

-

 

(13,673,981)

Balance at 30 June 2012

69,408,416

 

(90,486,359)

 

-

 

344,531

 

(20,733,412)

 

The accompanying notes form part of these financial statements

 

 

Note 1: General Information

 

Creat Resources Holdings Limited (CRHL) is a company incorporated in Australia. The address of its registered office and principal place of business is disclosed in note 32 to the financial statements. The principal activities of CRHL and its subsidiaries (the ‘Consolidated Entity’ or the ‘Company’) during the financial year were minerals exploration and the acquisition, exploration and operation of mineral properties in Australia.

 

Going Concern

The financial report has been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The Company is in a development stage and in the course of its activities has sustained operating losses. It expects such losses to continue for at least the next 12 months. The Company will finance its operations primarily through cash and cash equivalents on hand, future financing from the issuance of debt or equity instruments and through the generation of revenues once commercial operations get underway. However, the Company has yet to generate any significant revenues and has no assurance of future revenues.

Based on the Company’s forecasted cash flows through to 31 December 2013, further funding of $400,000 is required, of which there is a further $150,000 available in a facility with the Company’s parent entity, Creat Group. As disclosed in note 33, the Company has entered into an agreement to dispose of all the existing mining assets currently held in Tasmania, together with all associated plant and equipment, for a total consideration of AUD $4million in cash.

The following plan is in place by Management to support the going concern basis of the Company and the consolidated entity.

On 31 October 2012 the Company received an undertaking from Creat Group in that, for the purposes of assisting the company in achieving its working capital forecast to 31 December 2013:

·       Creat Group will continue to provide further funding to CRHL as required with interest rates to be charged based on market interest rates; and

 

·       Creat Group will not call for or cause repayment of any loans or convertible notes, including the payment of accrued interest on such loans or convertible notes, held by Creat Group at 30 June 2012 or entered into/acquired by Creat Group subsequent to that date, and interest that will be due and payable on such loans or convertible notes through to 31 December 2013.

 

At the date of this report and having considered the above factors, the directors are confident that the Company and the consolidated entity will be able to continue as going concerns.

 

Note 2: New Accounting Standards for Application in Future Periods

 

The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Consolidated Entity. The Consolidated Entity has decided not to early adopt any of the new and amended pronouncements. The new and amended pronouncements that are relevant to the Consolidated Entity and applicable in future reporting periods are set out below:

 

 

 

 


Note 2: Adoption of new and revised Accounting Standards (cont).

 

Standard/Interpretation

Effective for annual reporting periods beginning on or after

Expected to be initially applied in the financial year ending

AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income

1 July 2012

30 June 2013

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements

1 July 2013

30 June 2014

AASB 9 Financial Instruments

1 January 2015

30 June 2016

AASB 10 Consolidated Financial Statements

1 January 2013

30 June 2013

AASB 11 Joint Arrangements

1 January 2013

30 June 2013

AASB 12 Disclosure of Interests in Other Entities

1 January 2013

30 June 2013

AASB 13 Fair Value Measurement, AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13

1 January 2013

30 June 2013

AASB 119 Employee Benefits

1 January 2013

30 June 2013

AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities

1 January 2013

30 June 2013

AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities

1 January 2014

30 June 2014

AASB 127 ‘Separate Financial Statements’ (2011)

1 January 2013

30 June 2014

AASB 128 ‘Investments in Associates and Joint Ventures’ (2011)

1 January 2013

30 June 2014

AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards’

1 January 2013

30 June 2014

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle

1 January 2013

30 June 2014

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)

1 January 2013

30 June 2014


Note 3: Significant Accounting Policies

 

a)             Statement of Compliance

These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.

The financial statements comprise the consolidated financial statements of Creat Resources Holdings Limited and its subsidiaries (the ‘Company’ or ‘Consolidated Entity’). For the purposes of preparing this report, the Company is a for-profit entity.

Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Consolidated Entity comply with International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by the directors on 31 October 2012.

 

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Creat Resources Holdings Limited as an individual entity (the ‘Company’ or ‘Parent Entity’) and the consolidated entity consisting of Creat Resources Holdings Limited and its subsidiaries (the ‘Group’ or ‘Consolidated Entity’).

 

b)             Basis of Preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for the assets. All amounts are in Australian dollars, unless otherwise noted.

 

c)             Basis of Consolidation

A subsidiary is any entity Creat Resources Holdings Limited has the power to control the financial and operating policies of, so as to obtain the benefit from its activities. All controlled entities have a June financial year end.

All intercompany balances and transactions between entities in the Consolidated Entity, including any unrealised profits or losses, have been eliminated on consolidation. Where controlled entities have entered or left the Consolidated Entity during the year, their operating results have been included/excluded from the date control was obtained or until control ceased.

 

d)             Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at 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. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant Standards. Changes in the fair value of contingent consideration classified as equity are not recognised.


Note 3: Significant Accounting Policies (cont).

 

Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3(2008) are recognised at their fair value at the acquisition date, except that:

·     deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Benefits respectively;

·     liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with AASB 2 Share-based Payment; and

·     assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

 

e)             Investments in Associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.


Note 3: Significant Accounting Policies (cont).

 

When a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

 

f)              Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Rental revenue is recognised when the right to receive the rent has been established. Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

 

g)             Income Tax

The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

§  except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

§  in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

§  except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

§  in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

 

Note 3: Significant Accounting Policies (cont).

 

Tax consolidation

The company and all its wholly-owned Australian resident entities are part of a tax consolidated group under Australian taxation law. Creat Resources Holdings Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 10. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

 

h)             Foreign Currencies Transactions and Balances

The individual financial statements of each group entity are presented in its functional currency being the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of Creat Resources Holdings Limited and the presentation currency for the consolidated financial statements.

Foreign currency transactions during the year are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts payable and receivable in foreign currencies at balance date are converted at the rates of exchange ruling at that date. The gains and losses from conversion of short term assets and liabilities, whether realised or unrealised are included in the profit from ordinary activities as they arise.

i)               Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or current liability in the balance sheet. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

 

 


 

Note 3: Significant Accounting Policies (cont).

 

j)               Cash and Cash Equivalents

Cash and Cash Equivalents includes cash on hand, deposits held at call with financial institutions (net of bank overdrafts), other short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

k)             Financial Instruments

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial statements.

Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’.

Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss (FVTPL) where the financial asset:

§  has been acquired principally for the purpose of selling in the near future;

§  is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

§  is a derivative that is not designated and effective as a hedging instrument.

Loans and receivables

Receivables are recorded at fair value based on estimated amounts due less any provision for doubtful debts. Provision for doubtful debts is established when there is evidence that the Consolidated Entity will not be able to collect all amounts due according to the original term of receivables.

Available-for-sale Financial Assets

Available-for-sale (AFS) financial assets include any financial assets not included in the above categories. AFS financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.


 

Note 3: Significant Accounting Policies (cont).

 

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial Liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.


 

Note 3: Significant Accounting Policies (cont).

 

Derivative Instruments

Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the profit or loss statement unless they are designated as hedges.

Fair Value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

 

l)               Property, Plant and Equipment

Recognition and Measurement

Land and buildings are carried at valuation. Other items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. All property, plant and equipment are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use.

When parts of an item property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that future economic benefits associated within the part will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Depreciation

Depreciation where applicable, has been charged in the accounts so as to write off each asset over the estimated useful life of the asset concerned. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. The straight-line method of depreciation is used. The depreciation rates used for each class of depreciable assets are:

Depreciation Rate Class of Fixed Assets

Buildings 1.5-2.5%

Plant and equipment, leasehold improvements 6-33%

Leased plant and equipment 13-20%

Depreciation methods, useful lives and residual values are reassessed at the reporting date.

For mine properties the economic benefits from the asset are consumed in a pattern which is linked to the production level. Except as noted above, such assets are depreciated on a unit of production basis.

 


 

Note 3: Significant Accounting Policies (cont).

 

m)           Exploration and Evaluation Expenditure

The Company holds current rights of tenure over any undiscovered resources in the areas of interest. Significant amounts have been expensed to progress this work. Exploration and evaluation expenditures 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 is also 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 include 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 and 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 not 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.

n)             Mine Development Expenditure

Mine Development expenditure incurred by or on behalf of the Consolidated Entity is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the directors. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure having a specific nexus with the development property.

Once a development decision has been taken, any deferred exploration and evaluation expenditure is transferred to “Development Expenditure”.

All expenditure incurred prior to the commencement of commercial levels of production from each development property, is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from the sale of that property, is reasonably assured.

 


 

Note 3: Significant Accounting Policies (cont).

 

Mine Development expenditure is capitalised only if development costs can be measured reliably, the mining and production process is technically and commercially feasible, future economic benefits probable and the Consolidated Entity has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the profit or loss statement when incurred.

No amortisation is provided in respect of mine development properties until they are reclassified as “Mine Properties” following a decision to commence mining.

o)             Mine Properties

Mine properties represent the accumulation of all development expenditure incurred by or on behalf of the Consolidated Entity in relation to areas of interest in which mining of a mineral resource has commenced. When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when it is probable that the associated future economic benefits will flow to the Consolidated Entity, otherwise such expenditure is classified as part of the cost of production.

Amortisation is provided on either a unit-of-production basis so as to write off the cost in proportion to the depletion of the proven and probable mineral reserves.

Changes in factors such as estimates of proved and probable reserves that affect unit-of-production calculations are dealt with on a prospective basis.

p)             Rehabilitation and Mine Closure Costs

The Consolidated Entity has certain obligations to restore and rehabilitate mine properties. A non-transferable bond is held by Mineral Resources Tasmania and is included under Other Financial Assets.

q)             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 cashflows. 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 exploration, development, production, transportation or storage 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 restoring the affected areas. The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date, based on current legal and other requirements and technology. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the present value of the restoration provision at each reporting date.

Note 3: Significant Accounting Policies (cont).

 

r)              Impairment of Assets (excluding Goodwill)

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Income Statement. 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 (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 revalued amount, in which case the impairment loss is treated as a revaluation decrease (refer note 2(l)).

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent 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 (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 fair value, in which case the reversal of the impairment loss is treated as a revaluation increase

For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

 

s)             Leased Assets

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the Consolidated Entity are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the Consolidated Entity will obtain ownership of the asset or over the term of the lease.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred on a straight line basis over the life of the lease.

t)              Trade and Other Payables

These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

 

 


 

Note 3: Significant Accounting Policies (cont).

 

u)             Employee Entitlements

Provision is made for employee entitlements arising from services rendered by employees to balance sheet date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries, annual leave and any accumulating sick leave which will be settled after one year, have been measured at amounts expected to be paid when the liability is to be settled plus related on-costs. Other employee entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements. Contributions are made by the Consolidated Entity to an employee superannuation fund and are charged as expenses when incurred.

Defined contribution plans

Contributions to defined contribution superannuation plans are expensed when employees have rendered service entitling them to the contributions.

Equity-settled compensation

The Consolidated Entity operates a share option scheme, which enables directors and employees to be granted options to acquire ordinary shares in the share capital of the Company. The Share Option Plan provides the directors with a means to attract, retain and reward directors and employees. The bonus element over the exercise price of the employee services rendered in exchange for the grant of options is recognised as an expense in the Income Statement. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares of the options granted.

 

v)             Borrowing Costs

Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangement of borrowings. Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life of the borrowings. Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the assets. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is that incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate.

 

w)           Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.


 

Note 4: Critical Accounting Judgments and Key Sources of Estimation Uncertainty

 

In the application of the Group’s accounting policies, which are described in note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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 following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date.

 

A provision for restoration and rehabilitation has been provided for.  Management has commissioned expert consulting reports on its rehabilitation and decommissioning objectives from which the current estimate of total expected rehabilitation expenses is $2,854,474 over approximately 3 years. Expenditure in 2013 is projected to be around $1.2 million. The assumptions are that Comstock will be decommissioned and rehabilitated in 2 phases and across 6 zones, in such a way that the cost of water quality management will decrease completely over that time. Environmental factors such as weather conditions and rate of decommissioning prevent more accurate modelling of these cost estimates.

 

Note 5: Segment Information

 

AASB 8 required operating segments to be identified on the basis of internal reports about components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

 

The chief decision maker of the Company is its Board of Directors, and the system of internal reporting is such that there is only one reportable segment under AASB 8, being mineral exploration within Tasmania, Australia.

 

 

 

 


 

Note 6: Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

$

 

$

 

Revenue

 

 

 

 

 

 

 

 

 

Rent

 

 

 

 

11,878

 

-

 

 

Interest Income

 

 

 

 

142,601

 

181,165

 

 

Sundry Income

 

 

 

 

120,717

 

30,462

 

Total Revenue

 

 

 

 

275,196

 

211,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 7: Other Gains and Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

$

 

$

 

Foreign Currency Gain/(loss)

 

 

 

 

(515,085)

 

4,274,612

 

Change in fair value of derivative liability

 

 

 

 

5,955,709

 

(2,994,209)

 

Gain/(loss) on sale of Assets

 

 

 

 

97,252

 

(5,872)

 

Gain/(loss) on Reclassification of Investment

 

-

 

25,122,491

 

Impairment of Investment

 

(6,285,117)

 

(26,761,790)

 

 

 

 

 

 

 

(747,241)

 

(364,768)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 8: Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

$

 

$

 

Loss from ordinary activities has been determined after:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance Costs:

 

 

 

 

 

 

 

 

 

Interest Expense - Related Parties

 

 

 

 

9,504,711

 

2,826,649

 

 

Interest Expense - Other Persons

 

 

 

 

105,135

 

3,798,055

 

 

Finance Charges on Finance Leases

 

 

 

 

-

 

6,747

 

 

Amortisation of Deferred Finance Costs

 

 

 

 

83,283

 

83,283

 

 

Interest Expense - Provision for Rehabilitation

 

 

 

 

-

 

31,882

 

 

 

 

 

 

 

9,693,129

 

6,746,616

 

Employee Benefit Expenses:

 

 

 

 

 

 

 

 

 

Post employment benefits:

 

 

 

 

 

 

 

 

 

Defined contribution plan

 

 

 

 

69,281

 

132,970

 

Rental Expense relating to Operating Leases

 

 

 

 

115,528

 

151,897

 


 

Note 8: Expenses (cont.)

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

$

 

$

Depreciation of Non Current Assets:

 

 

 

 

 

 

 

 

Property, Plant & Equipment

 

 

 

 

249,217

 

310,977

Exploration and Evaluation costs expensed

 

 

 

 

325,448

 

1,374,883

Decommissioning and rehabilitation provision

 

 

 

 

569,615

 

2,282,040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 9: Remuneration of Auditors

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

$

 

$

Auditor of the Parent Entity

 

 

 

 

 

 

 

 

Audit or review of the financial report

 

 

 

 

77,699

 

130,479

 

Other non-audit services (as below)

 

 

 

 

5,000

 

46,600

 

 

 

 

 

 

82,699

 

177,079

 

- Deloitte Corporate Finance Pty Limited (a Member of Deloitte Touche Tohmatsu) prepared an independent expert’s report in connection with advising CRHL Shareholders on proposed transactions considered at an Extraordinary General Meeting.

 

 

 

-

 

39,750

 

- Deloitte Growth Solutions Pty Limited (a Member of Deloitte Touche Tohmatsu) prepared an income tax return and provided professional advice on tax issues.

 

 

 

 

5,000

 

 

6,850

 

No other benefits were received by the Auditor.

 

 

 

 

 

 

 

The auditor of Creat Resources Holdings Limited is Deloitte Touche Tohmatsu.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Note 10: Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

$

 

$

(a)

Income tax recognised in loss:

 

 

 

 

 

 

 

 

Tax (benefit)/expense/ relating to continuing operations

 

-

 

-

 

 

 

 

 

 

 

 

 

(b)

Numerical reconciliation of income tax expense to prima facie income tax payable

 

 

 

 

Accounting loss before income tax

 

 

 

 

(13,673,981)

 

(20,439,089)

 

Income tax benefit calculated at 30%

 

 

 

 

(4,102,194)

 

(6,131,727)

 

Future income tax benefit not brought to account

 

4,102,194

 

6,131,727

 

Income tax (benefit)/expense

 

 

 

 

-

 

-

 

 

 

 

 

 

 

 

 

The potential future income tax benefit at year end not brought to account is:

 

25,729,240

 

21,627,046

 

 

 

 

 

 

 

 

 

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

 

 

 

 

 

 

 

 

 

The Company and its wholly owned Australian resident entities have formed a tax consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Creat Resources Holdings Limited. The members of the tax-consolidated group are identified at note 31.

 

 

 

 

 

 

 

 

 

The benefit of tax losses will only be obtained if:

 

 

 

 

 

 

 

-

the Company and its subsidiaries derive future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;

-

the Company and its subsidiaries continue to comply with the conditions for deductibility imposed by the law; and

-

no changes in tax legislation adversely affect the Company and its subsidiaries in realising the benefit from the deduction for the losses.

 

 

 

 

 

 

 

 

 

(c)

Tax assets and liabilities

 

 

 

 

 

 

 

 

Non-Current tax liabilities

 

 

 

 

 

 

 

 

Tax allowances relating to land and buildings revaluation adjustment taken directly to equity.

 

-

 

-

 

 

 

 

 

 

 

 

 

 

Reconciliation of movement

 

 

 

 

 

 

 

 

Opening balance

 

 

 

 

-

 

-

 

Revaluation of liability

 

 

 

 

-

 

-

 

Closing balance

 

 

 

 

-

 

-


 

Note 11: Trade and Other Receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

$

 

$

 

Current

 

 

 

 

 

 

 

 

Debtors (i) (ii)

 

 

 

 

60,900

 

27,543

 

Advances to other parties or persons

 

 

 

 

369

 

500

 

 

 

 

 

 

 

61,269

 

28,043

 

Ageing of past due but not impaired

 

 

 

 

 

 

 

 

60-90 days

 

 

 

 

-

 

-

 

90-120 days

 

 

 

 

-

 

-

 

120 + days

 

 

 

 

8,725

 

9,725

 

 

 

 

 

 

 

8,725

 

9,725

 

Movement in allowance for doubtful debts

 

 

 

 

 

 

 

 

Balance at the beginning of the year

 

 

 

 

-

 

-

 

Impairment losses recognised on receivables

 

 

 

 

-

 

-

 

Amounts written off as uncollectible

 

 

 

 

-

 

-

 

Balance at the end of the year

 

 

 

 

-

 

-

 

(i)

Impaired receivables

 

 

 

 

 

 

 

 

 

The consolidated entity has no impaired receivables at 30 June 2012 (2011: nil).

 

 

 

(ii)

Past due but not impaired

 

 

 

 

 

 

 

 

 

Where financial assets are past due but not impaired, the consolidated entity has assessed that the credit quality of these amounts has not changed and the amounts are still considered recoverable.

 

Note 12: Other Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

$

 

$

 

Deposits and advances

 

 

 

 

109,241

 

112,660

 

GST recoverable/(payable)

 

 

 

 

(5,744)

 

13,882

 

 

 

 

 

 

 

103,497

 

126,542

 

Note 13: Other Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

$

 

$

 

Non-Current

 

 

 

 

 

 

 

 

Security Bond – at cost

 

 

 

 

 

 

 

 

Non-transferable bond (held by Mineral Resources Tasmania) (i)

 

 

2,500,000

 

2,500,000

 

 

 

 

 

 

 

2,500,000

 

2,500,000

 

 

 

 

 

 

 

 

 

 

 

(i)

A $2,500,000 bond was paid to Mineral Resources Tasmania for the Mining Licences in March 2007. This is expected to cover costs for decommissioning and rehabilitating the mine site and disturbed areas and is expected to apply if the operation ceases at any time up to the end of the expected mine life.

 


Note 14: Investments in Associates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On 15 February 2011, Galaxy Resources Limited (“Galaxy”), an S&P/ASX300 emerging mining and chemical company focusing on lithium and tantalum production, completed fundraising issuing 21,582,733 shares to Fengli Group (Hong Kong) Co Limited, which diluted the company’s holding to 17.78%. Further equity raisings diluted the company’s holding to 11.78% by 23 May 2011. As a result, the company no longer believed it had the ability to significantly influence the financial and operating policy decisions of Galaxy and equity accounting ceased effective 28 February 2011.

 

 

 

 

 

 

 

 

 

 

 

Summarised financial information in respect of the Company’s associate is set out below (i):

 

 

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

 

 

 

$

 

Financial position (ii)

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

276,902,815

 

Total liabilities

 

 

 

 

 

 

161,175,029

 

Net assets

 

 

 

 

 

 

115,727,786

 

Company's share of associate's net assets

 

 

 

 

 

 

22,911,546

 

 

 

 

 

 

 

 

 

 

 

Financial performance (iii)

 

 

 

 

 

 

 

 

Total revenue for the period

 

 

 

 

 

 

8,114,825

 

Total loss for the period

 

 

 

 

 

 

(25,803,560)

 

Company's share of associate's loss

 

 

 

 

 

 

(5,108,536)

 

Company's share of associate's movement in reserves

 

 

739,166

 

Company's share of associate's comprehensive income

 

 

-

 

 

 

 

 

 

 

 

 

 

 

(i)

Associate's financial information is unaudited.

 

 

 

 

 

 

 

(ii)

2012: N/A (2011: as at 28 February 2011).

 

 

 

 

 

(iii)

2012: N/A (2011: for the 8 months to 28 February 2011).

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends received from associate

 

 

 

 

 

 

 

 

The Company received no dividends from its associate during the 2011 financial year.

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 15: Other Non-Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 30 June 2012, the Company holds 10.45% (2011: 11.78%) of the ordinary share capital of Galaxy Resources Limited ("Galaxy"), an S&P/ASX300 emerging mining and chemical company focusing on lithium and tantalum production. The principal assets are the Mt Cattlin Lithium Project, near Ravensthorpe, Western Australia and a wholly owned plant in Jiangsu, China.

 

 

 

 

 

 

2012

 

2011

 

Available-for-sale investments carried at fair value

 

 

 

$

 

$

 

Quoted shares (i)

 

 

 

 

22,283,595

 

28,568,712

 

 

 

 

 

 

 

 

 

 

 

(i)    An impairment expense was recognised on the company’s investment in Galaxy at 30 June 2012 as the fair value of the company’s holding, as measured by reference to Galaxy’s listed share price, continued to decline significantly during the 2012 financial year.

 


Note 16: Property, Plant and Equipment

 

 

 

 

 

 

 

 

Land & Buildings

Leasehold Improvements

Plant & Equipment

Leased Assets

Mine Development

Mine Properties (i)

Total

Consolidated Entity

$

$

$

$

$

$

$

Gross carrying amount

 

 

 

 

 

 

 

Balance at 1 July 2010

225,475

50,667

4,260,497

519,531

146,167

9,236,409

14,438,746

Additions

-

-

126,664

-

-

-

126,664

Disposals

-

-

(1,991)

(39,743)

-

-

(41,734)

Balance at 1 July 2011

225,475

50,667

4,385,170

479,788

146,167

9,236,409

14,523,676

Additions

-

-

-

-

-

-

-

Disposals

-

-

-

(316,884)

-

-

(316,884)

Balance at 30 June 2012

225,475

50,667

4,385,170

162,904

146,167

9,236,409

14,206,792

Accumulated depreciation/ amortisation and impairment

 

 

 

 

 

Balance at 1 July 2010

(15,501)

(9,833)

(3,384,377)

(288,315)

(146,167)

(9,236,409)

(13,080,602)

Disposals

-

-

1,090

31,803

-

-

32,893

Depreciation expense

(4,430)

(5,067)

(201,409)

(100,071)

-

-

(310,977)

Balance at 1 July 2011

(19,931)

(14,900)

(3,584,696)

(356,583)

(146,167)

(9,236,409)

(13,358,686)

Disposals

-

-

-

268,709

-

-

268,709

Depreciation expense

(4,430)

(9,413)

(166,952)

(68,422)

-

-

(249,217)

Balance at 30 June 2012

(24,361)

(24,313)

(3,751,648)

(156,296)

(146,167)

(9,236,409)

(13,339,194)

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

As at 30 June 2011

205,544

35,767

800,474

123,205

-

-

1,164,990

As at 30 June 2012

201,114

26,354

633,522

6,608

-

-

867,598

 

(i) Mine Properties: A $9,236,409 asset was recognised at 30 June 2008. Following cessation of mining operations and significant uncertainty as to when commercial mining will recommence, an impairment loss of the full amount has been recognised. The directors have assessed that this now reflects the recoverable amount of the asset. The asset may have value in the future if further resource definition and exploration work supports the recommencement of commercial mining operations.


Note 17: Trade and Other Payables

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

$

 

$

Current

 

 

 

 

 

 

 

Trade payables (i)

 

 

 

 

343,062

 

358,318

Sundry accruals

 

 

 

 

53,795

 

77,140

 

 

 

 

 

 

396,857

 

435,458

 

 

 

 

 

 

 

 

(i)

The average credit period on purchases is 30 days. No interest is charged on the trade payables for the first 60 days from the date of the invoice. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

 

 

 

 

 

 

 

 

 

Note 18: Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

$

 

$

Current

 

 

 

 

 

 

 

Unsecured convertible notes (ii)

 

 

 

 

35,460,977

 

27,625,363

Loans from related party: secured and unsecured (i)

 

 

 

 

8,133,803

 

4,662,843

Withholding tax payable on convertible notes

 

 

 

 

11,015

 

244,811

 

 

 

 

 

 

43,605,795

 

32,533,017

 

 

 

 

 

 

 

 

 

Non-Current

 

 

 

 

 

 

 

Unsecured convertible notes (ii)

 

 

 

 

-

 

4,225,628

 

 

 

 

 

 

-

 

4,225,628

 

 

 

 

 

 

 

 

 

Convertible Notes

 

 

 

 

 

 

 

Proceeds from issue of convertible notes

 

 

 

 

28,405,978

 

28,405,978

Transaction costs

 

 

 

 

(401,302)

 

(401,302)

Net proceeds

 

 

 

 

28,004,676

 

28,004,676

 

 

 

 

 

 

 

 

 

Amortisation of deferred finance costs

 

 

 

 

348,663

 

265,380

Accreted interest

 

 

 

 

17,219,857

 

8,133,901

Change in option value

 

 

 

 

(7,959,426)

 

(2,003,717)

FX (gain)/loss

 

 

 

 

(2,152,793)

 

(2,549,249)

Carrying amount of liability at 30 June

 

 

 

 

35,460,977

 

31,850,991

 

 

 

 

 

 

 

 

 


 

Note 18: Financial Liabilities (cont.)

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

$

 

$

Components of the liability are:

 

 

 

 

 

 

 

Loan held at amortised cost

 

 

 

35,513,617

 

26,053,018

Derivative held at fair value through profit and loss

 

 

 

-

 

5,933,895

Deferred finance costs

 

 

 

(52,640)