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MOLY MINES LIMITED A N N U A L R E P O R T 2 0 0 9 M e t a l s F o r O u r T i m e For personal use only
Transcript of · Footer. 2cm. Text. margin. Text. margin. Front Inside Cover Page. ABN 32 103 295 521. Board Of...
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MOLYMINESLIMITED
A N N U A L R E P O R T 2 0 0 9
M e t a l s F o r O u r T i m e
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Front Inside Cover Page
ABN 32 103 295 521
Board Of DirectorsDavid Craig Non-Executive ChairmanDerek Fisher Chief Executive OfficerDavid Constable Non-Executive DirectorMichael Senft Non-Executive DirectorJohn David Nixon Non-Executive Director
Executive OfficersAndrew Worland Company SecretaryCollis Thorp Chief Operating OfficerJohn McEvoy Chief Financial OfficerMichael Gloyne General Manager Operations
Principal & Registered Office50 Kings Park Road PO Box 8215West Perth, WA, 6005 Subiaco East, WA, 6008Telephone: +61 8 9429 3300Fax: +61 8 9429 3399
Toronto, Canada – Investor RelationsNatalie FrameTelephone +1 416 777 1801Mobile +1 416 371 7541
AuditorsErnst & YoungAustralia
ASX Code/TSX Code: MOL
Email: [email protected]: www.molymines.com
ASX Share RegisterComputershare Investor Services Pty LtdLevel 2 / 45 St Georges TerracePerth, WA, 6000Telephone +61 8 9323 2000Fax +61 8 9323 2033Web: www.computershare.com
TSX Share RegisterComputershare100 University Ave9th Floor, North TowerToronto, Ontario M5J2YI, CanadaTelephone +1 514 982 7888Fax +1 514 982 7580Web: www.computershare.com
This photo: Unloading ball mill off ship at Henderson, WA.
Cover: Ring-Tailed Dragon at Spinifex Ridge.
CORPORATE DIRECTORYF
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CONTENTS
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2 Highlights of 2008/2009
3 Chairman’s Letter
4 Chief Executive Officer’s Report
6 Spinifex Ridge Molybdenum Project
10 Spinifex Ridge Iron Project
13 Corporate Governance Statement
19 Financial Report 2009
108 ASX Additional Information
109 Schedule of Tenements
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HIGHLIGHTS OF 2008/2009
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Corporate & Finance
TCW Interim Financing Facility restructured
C$31.5 million Institutional Placement bookbuild completed October 2010
42 million shares at C$0.75/share with a 1 for 3, 3 year attaching warrant/option exercisable at C$1.00
Spinifex Ridge Molybdenum Project
Most Advanced, construction ready Mo project in the world.
Fully permitted, mining leases granted, native title agreement, construction ready for 20Mtpa plant and mine.
A$120 million major long lead items of equipment delivered to Perth.
Can be built at beginning of metal cycle to benefit from the next peak in metal prices.
Prime location in Pilbara Fe mining region of Western Australia.
Feasibility engineering and design work on the 10Mt/a project commenced.
Spinifex Ridge Iron Ore Project
JORC Resource
6.1 million tonnes Indicated Resource, 59% Fe
1Mt/a planned production rate
3:1 strip ratio
60:40 fines : lump ratio
Port access secured at the new Utah Point, Port Hedland facility
A$10.0 million capital cost.
A$45.7/t operating cost
Development timetable
Construction Q1, 2010
Pre-strip – Q2, 2010
First Ore on Ship – Q3, 2010
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CHAIRMAN’S LETTER
DEAR SHAREHOLDER
I would like to congratulate our staff, led by CEO andManaging Director, Dr Derek Fisher, on their efforts thisyear. The team has remained focused, dedicated andcommitted to the Company during an extremely diff icultperiod in the Company’s evolution.
I express my thanks to my fellow board members whosediligence, professionalism, commitment and support thisyear has been outstanding.
I acknowledge it has been a diff icult year at times forshareholders. However, as a consequence of ourmanagement team’s hard work, shareholder value hasbeen preserved and with our finances restructured, theCompany can now look forward to an exciting year aswe bring our iron ore to market and advance themolybdenum project as the world’s most advancedgreenfield development project. I thank you for yourongoing support.
Yours sincerely
David CraigChairman
The year also saw the Company take delivery ofapproximately A$120 million worth of key processingequipment for the Spinifex Ridge Molybdenum Projectmine, including a primary crusher, ball mil ls and highpressure grinding rolls. This equipment was deliveredon time and on budget and inc ludes some of the largestscale processing equipment manufactured in the world.The Company ordered the equipment in April 2007 aspart of the strategy to fast track project developmentwith final payments anticipated to be made through asuccessful full project f inancing during 2008. However,the collapse of global credit markets in 2008 made a fullfinancing impossible.
Despite the market turmoil the Company was still ableto complete a 12 month, US$150 mill ion interimfinancing facil ity for the project that funded the finalpayments for the equipment. The facil ity was drawndown in full in September and October 2008.
Within weeks of the final drawdown of the facili ty themolybdenum price fell from US$33.00/lb to US$10.00/lband remained at this level or below until June 2009. Theslight price recovery in July and August 2009 providedthe impetus for a restructure of the facility.
A restructure agreement was negotiated with our lenderthat extends the loan maturities to between 18 monthsand 5 years on the condition that we could successfullyraise a minimum US$25 million. The recently announcedequity financing of C$31.5 mill ion has met thiscondition.
I am pleased to report that despite the enormous difficulties brought about by theglobal financial crisis and the downturn in the molybdenum market, yourCompany has emerged with a secure platform for future growth with arestructured balance sheet, a near term production asset in the Spinifex RidgeIron Ore Project and the world class, fully permitted Spinifex Ridge MolybdenumProject.
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As our Chairman has highlighted, 2009 has presented our Company withenormous hurdles. It is therefore extremely pleasing to report that at the time ofwriting our Company has overcome the challenges presented by the potentiallycrippling affects of the global financial crisis, the down turn in world molybdenumprices and near term debt maturity.
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CHIEF EXECUTIVE OFFICER’S REPORT
Fortunately the last 6 months has seen the Company’sfortunes change for the better, Molybdenum priceshave started to recover, the world is slowly pulling outof the Recession, and there has been a marked surgein acquisition activity by large Chinese companies,obviously taking a strong bullish view on future metalmarkets and metal demand.
During the same period our geologists have discovereda number of small but “direct shipping” grade iron oredeposits within the Spinifex Ridge “mining precinct”.These deposits can be rapidly brought to productionbenefiting significantly from the existing permitt ing forthe molybdenum deposit. Hopefully when I report to youagain in 12 months time we will have shipped to marketour first iron ore.
Our molybdenum project still has an enormousadvantage of being at the “head of the queue” of newpotential mines. We sit in the excellent position ofbeing able to build the mine at the beginning of thenext metal cycle, be in production and reaping thebenefits of strong cash flows at the top of the cycle. Somany large mines tend to be financed at the top of thecycles and then suffer declining cash flows as metalprices fall away during their early production years.
Last year it was a testament to the quality of theSpinifex Ridge Molybdenum Project that despite theglobal f inancial crisis and the freeze in debt and equitycapital markets during 2008, that we were able to closeon the US$150 million Interim Financing Facility.
The funds from the facil ity were used to completemanufacture and shipment of the major long lead itemsof plant and equipment for the 20Mt/a Spinifex RidgeMolybdenum Project. This equipment was ordered inApril 2007. Failure to order this equipment at this t imewould have resulted in the project loosing vitaldevelopment time and potentially miss the forecast
strong molybdenum prices in the latter part of thisdecade and early next. The Company has now takendelivery of this equipment.
It became clear during first quarter 2009 that thecombined effect of the state of the molybdenum andcredit markets would make a full project f inancing forthe Spinifex Ridge Molybdenum Project impossible inthe near term. Accordingly restructuring our financeshas been a focus of the Company.
Negotiating the restructure of the Interim FinanceFacili ty was predicated on a smaller scale developmentoption for the Spinifex Ridge Molybdenum Project andthe near term cashflow generation potential of theSpinifex Ridge Iron Ore Project.
It was pleasing to announce in August 2009 thecompletion of a Term Sheet for the restructure of thefacility.
The restructure will become effective on the Companycompleting a minimum US$25 mill ion equity f inancing.The firs t US$25 million of the equity financing will beretained to be used primarily for the development of theSpinifex Ridge Iron Ore Project with any surplus fundsraised above this minimum level used to pay down thedebt.
On 8 October 2009 the Company announced thefinalization of terms for the equity f inancing whichconsists of 42,000,000 units (“Units”) in Moly Mines at aprice of C$0.75 per Unit, for gross proceeds of up toC$31,500,000. Each Unit is comprised of one ordinaryshare (“Ordinary Share”) of the Company and one-thirdof one Ordinary Share purchase warrant (“Warrant”),each whole Warrant entit ling the holder to purchaseone Ordinary Share at a price of C$1.00 for a period of3 years following the closing date.
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The Company is now moving rapidly forward with theIron Ore Project with development planned for Q1 &Q2, 2010 and first shipments of ore in July 2010. In themeantime, a major effort is underway to bring a partnerinto the Molybdenum Project, a partner that can bringearly financing for it’s development.
In conclusion I would like to echo the thoughts of ourchairman and thank all our staff for their commitmentand dedication throughout a diff icult year. I would alsolike to thank our loyal shareholders for their patienceduring the year. With our finances restructured and ourplatform for growth secure, I am excited about the yearahead as we endeavour to bring cashflow into ourbusiness through the Spinifex Ridge Iron Ore Projectand complete full project funding for the Spinifex RidgeMolybdenum Project.
Yours sincerely
Dr. Derek FisherChief Executive Officer and Managing Director
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Mt Newman (Fe)
Woodie Woodie(Mn)
Telfer(Au, Cu)
Paraburdoo (Fe)
Tom Price (Fe)
Marble Bar
Nifty (Cu)
Port HedlandDampier
Broome
Spinifex Ridge
Yarrie (Fe)
100kms
Karratha
W e s t e r nA u s t r a l i a
1
95 Cloudbreak (Fe)
Major Road
Rail
Major Port
Gas Pipeline
Australia1
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SPINIFEX RIDGE MOLYBDENUM PROJECT
The study determined a viable development scenariofor a 10Mt/a mining and processing operation with asignificantly reduced capital hurdle compared to the fullfeasibili ty for the project whilst maintaining attractivefinancial fundamentals.
In the current economic climate, this development scaleis now the preferred development scenario.
The highlights of the study were:
Mining and processing rate of 10mt/a (expansionpotential to 11.3mt/a with initial equipment and20mt/a with incremental capital).
24 year mine life.
0.07% Mo head grade for first 10 years.
A$528 million capital cost.
US$7.80/lb Mo operating cost; and
A$461 mill ion NPV ($17.50/lb long term Moprice).
Final feasibil ity study engineering works havecommenced on the 10Mt/a project. Outside of this workstream the project is development ready - key contractsthat could support an immediate financing remain inplace, as does the full permitting for the project.
In August 2009, the Company took delivery of the keylong lead items of equipment required for the full20mt/a Spinifex Ridge Molybdenum Project, at a costover A$120 million. A sell ing agent has been appointedto divest equipment that has been identified as beingsurplus to the 10Mt/a project.
The proceeds derived from sales wil l be used toextinguish the US$40 mill ion April 2011 debt, describedin the Finance section below.
In April 2009 the Company completedan advanced engineering study for areduced scale project development.
JORC / NI43-101 classification Mt Mo% Cu% Ag g/t
Proven reserves 199.7 0.06 0.10 1.5
Probable reserves 251.1 0.04 0.07 1.1
TOTAL 450.8 0.05 0.08 1.3
RESERVES
JORC / NI43-101 classification Mt Mo% Cu% Ag g/t
Measured resources 206.8 0.06 0.10 1.5
Indicated resources 445.4 0.04 0.07 1.1
TOTAL 652.2 0.05 0.08 1.3
Inferred resources 399.0 0.04 0.07 1.1
RESOURCES
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(1) Net of capital already spent by Moly Mines.(2) Net of copper credits, but before state royalties.
Spinifex Ridge 10mt/a Project Statistics and Details
COMPARATIVE PROJECT STATISTICS
10mt/a Advanced Scoping Study Updated 20mt/a DFS
First 10 years Life of Mine
Ore mined Mt 181.7 235.6 420.1
Waste mined Mt 154.6 226.9 449.1
Strip ratio 1.2 1.0 1.1
Average Mo grade % 0.07 0.055 0.045
Mo Production Mlb 119.7 249.8 374.4
Cu Production Mlb 147.7 314.2 480.3
Capital cost (1) A$M 528 528 1,107
Operating cost (2) US$/lb 7.8 7.8 8.5
Delivery of ball mills, Western Australia.
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PERMITS AND APPROVALS
Environmental approval, native title approval and othermining approvals that were received for the 20 mill iontonne per annum project are available for the 10 mill iontonne per annum project with minimal change required.
CAPITAL AND OPERATING COST ESTIMATES
Capital cost estimate for the 10mt/a case, includingcontingency is A$604 million or A$528 mill ion whencapital already spent is credited.
For the purposes of the Study, it was assumed that thepower station would be separately financed andtherefore power station construction costs are includedin the operating cost estimate. The 10mt/a project willsource water entirely from the De Grey borefield. TheCanning Basin, located some 60km from site andrequired under the 20mt/a project, will not be requiredreducing capital costs associated with pipelineconstruction from the borefield to site.
The DFS estimate from September 2007 was used asthe basis for the estimates for the 10mt/a case. Theestimate has been compiled from a combination of DFSand EPCM factored costs. Detailed engineering, withmaterial take off’s for estimating, has not beenconducted as part of this current capital estimate but itsintegrity is based on the significant amount ofengineering and tendering completed in the EPCMphase.
Operating costs have been determined using existingcontractual posit ions where appropriate, third partysourced estimates, processing plant factoring from the20mt/a DFS adjusted for the 10mt/a plant configurationand where applicable forward curves or consensusviews. Over the first 24 years of operation, averageannual operating cost is US$7.80/lb Mo, before roastingcosts and royalties.
Year
Units 1 2 3 4 5 6 7 8 9 10-24 Total
Ore milled Mt’s 8.3 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 147.3 235.6
Mo Grade Mo% 0.041 0.047 0.064 0.040 0.051 0.069 0.102 0.097 0.075 0.049 0.055
Cu Grade Cu % 0.068 0.075 0.094 0.090 0.098 0.100 0.175 0.161 0.115 0.082 0.092
Mo Recovery % 73% 79% 83% 80% 82% 85% 91% 91% 88% 88% 87%
Cu Recovery % 56% 61% 64% 63% 64% 64% 66% 67% 66% 67% 66%
Mo Production M’lb’s 5.3 8.2 11.7 7.3 9.3 12.9 20.3 19.4 14.8 140.7 250.0
Cu Production M’lb’s 6.8 10.1 13.0 12.6 13.7 14.0 25.4 23.7 16.9 178.2 314.2
PRODUCTION SCHEDULE
The following table highlights the proposed production schedule for the 10 million tonne per annum project.
Monitoring and Liaison Committee at Spinifex Ridge.
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Felsics
Basalt
Granite
Granite
Granite
Ultramafic
Iron Formation
Basalt
Ultramafic
BasaltML – Mining Leases
GPL – General Purpose Lease
EL – Exploration Licence
Basalt
Basalt
Rockchip Sample
1 km
56.1% Fe
55.2% Fe
61.4% Fe 61.9% Fe
59.2% Fe
61.6% Fe
55.1% Fe
60.2% Fe
55.8% Fe
64.7% Fe
Iron Ore Resource
6.1 Mt @ 59% Fe
Molybdenum-Copper Resource
652Mt @ 0.05% Mo, 0.08% Cu
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10Mtpa Resource Pit Shell
20Mtpa ResourcePit Shell
0.09% Mo Shell- High Grade Core 0.02% Mo Shell
N
N
Spinifex Ridge Tenement & Resource Plan
Conceptual 20Mtpa Mine Site Layout
Waste 3
Waste 2
ROM
Plant &Administration
Dry Stack Tailings
Mo Camp / Village
Port Hedland (170kms)
Airstrip
Creek DiversionChannel
High GradeStockpile
Low GradeStockpile
Mo \ Cu Pit
Fe Pits
Waste 1
Molybdenum Resource Cross Section
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SPINIFEX RIDGE IRON PROJECT
Gallifrey Pit
Auton Pit
Dalek PitWaste Dump
HaulRamp
ROM, crushing& Mine Offices
The Company completed a Pre-Feasibility Study (“PFS”) for theSpinifex Ridge Iron Ore Project duringthe year. The PFS successfullydemonstrated the viability of a 1Mt/aopen cut mining and processingoperation.The PFS is now supported by port access through thesoon to be completed Utah Point bulk commodity berthat Port Hedland. Utah Point is on schedule forcompletion during 2nd quarter 2010. It wil l providestock-pile, reclaim, ship loading and wharf facili ties withthe bulk commodity berth designed to handle 17.1Mt/a.
Moly Mines has been allocated an initial 0.8Mt/a ironore capacity for 20 months commencing July 2010. Afacility agreement is currently being documented.
OPERATING PHILOSOPHY
Open pit mining operations will be undertaken bycontract miners providing dril l and blast, and load andhaul services. Ore will be delivered to a Companyowned, conventional semi–mobile crushing andscreening plant which will produce two products, Lump(> 6 mm, <31.5 mm) and Fines (<6 mm). Contract roadhaulers using quad trailer, “road trains” will transportthe final product to Port Hedland to be shipped tocustomers.
MINERAL RESOURCES
The PFS was based on the following Mineral Resource,which was announced in June 2009:
In addit ion there is a further 1.2 million tonnes ofInferred Resource at 57.2% Fe.
Classification Tonnes Fe% SiO2% Al2O3 P% S% LOI%
Indicated 6,110,000 58.9 8.5 1.7 0.15 0.006 4.7
Ore Shells
Ore Shells
Conceptual Spinifex Ridge Iron Ore Mine Layout.For
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MINE PLANNING AND SCHEDULING
Open pit mine designs have been undertaken on the three dril led iron resources at Spinifex Ridge, namely Dalek,Gallifrey and Auton based upon the total Indicated and Inferred Resource. The total in pit resource within thesedesigns is estimated at 5.2 million tonnes of direct ship iron ore with an additional estimated 300,000 tonnes of orethat is in the Inferred Mineral Resource category.
The Company has completed pit optimizations using the Whittle™ software package and completed mine design
and ore scheduling. Input factors used in the mine optimization process were developed by Moly Mines and includedassumed overall pit s lope angles, benchmarked mine operating costs, estimated ore handling, ore processing,transportation and marketing costs, revenue estimates including impurity assessments and state government royalties.
The total mining inventory, which includes an estimated 300,000 tonnes of Inferred Mineral Resource is estimated at:
In Pit Mineral Resource Summary
Pit Ore Waste Total Material S/R Fe Al2O3 LOI P S SiO2
kt Kt kt % % % % PPM %
Gallifrey 1,579 4,346 5,925 2.75 59.67 1.50 4.96 0.16 64.01 7.30
Auton 3,650 10,593 14,242 2.90 59.20 1.70 4.75 0.11 136.77 8.03
Dalek 274 1,271 1,545 4.64 60.50 0.54 0.96 0.21 26.26 11.27
Grand Total 5,503 16,209 21,713 2.95 59.40 1.59 4.62 0.13 110.38 7.98
OPERATING AND FINANCIAL MODELS
Financial analysis of the Project has been run only onthe 5.2 mill ion tonne of Indicated Mineral Resourceswithin the pit shells.
Mine Statis t ics
Unit Base Case
Life of mine Years 5+
Capital cost A$’M 9.4
Pre-strip commences Date Q1 2010
First ore production Date Q2 2010
First shipment Date Q3 2010
Mining and processing rate Mt/a 1.0
Ore tonnes mined ‘000 5,200
Waste tonnes mined ‘000 15,574
Strip ratio 3.0
Average Fe grade Fe% 59.4
Lump/Fines ratio 40/60
Mining cost A$/t 9.7
Crushing costs A$/t 4.1
Haulage costs A$/t 19.2
Port costs A$/t 7.5
Site administration & overhead
A$/t 5.2
Total operating cost A$/t 45.7
RC Drilling for Iron Ore on top of Spinifex Ridge.
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Cost Estimates
Total capital cost, before contingencies, for the 1Mt/a development is estimated at A$9.4 million. A further A$2.4million ship loading prepayment wil l be made to the PHPA to reserve stockpiling and shipping capacity at the UtahPoint facility.
Total operating cost is estimated at A$45.7/t ore mined (FOB Port Hedland).
Financial Evaluation
The project has been modeled at various iron ore prices net of sales discounts and commissions estimated to reflectore quality.
Unit Benchmark Prices
Flat
3 Year Benchmark
Average
5 Year Benchmark
Average
Commodity Analyst
Forecast
100% Spot Fines
PriceFlat
Gross revenue US$/t 51.4 60.0 49.3 49.7 58.4
Commission US$/t (2.1) (2.4) (2.0) (2.0) (2,3)
Royalties US$/t (3.2) (3.7) (3.2) (3.1) (3.6)
Net revenue received
US$/t 46.2 53.9 45.8 44.6 52.5
Net revenue A$’000 319,292 372,272 316,390 307,532 362,223
Net pre-tax project cashflow
A$’000 67,680 120,660 64,778 55,921 110,611
Post tax IRR % 68.6 121.3 65.7 76.2 111.7
1) 5 year and 3 year averages to 30 June 20092) Spot price per Metal Bulletin Iron Ore Index 27 August 2009 quoted on a CFR China basis for US$83.85/t.3) Foreign exchange rates use an A$:US$ rate over the life of the project based on the forward curve at 13 August
2009.
Drill-pad north side of Dalek Prospect looking south..
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CORPORATE GOVERNANCE
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The Board of Moly Mines Limited is responsible for the corporate governance of the Company. The Board hasarranged the Company’s reporting on corporate governance practices to align with the principles of the ASX CorporateGovernance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (“the ASXRecommendations”).
The Company’s Corporate Governance Principles were approved in August 2006 and have been reviewed and updatedas necessary.
A description of the Company’s main corporate governance practices is set out below. Copies of the relevant corporategovernance policies are available in the corporate governance section of the Company’s website atwww.molymines.com.
The Board will continue to review and develop its corporate governance practices and the corporate governancesection of the website will be updated with policies and procedures as they are formally adopted by the Company.
Where the Company’s practices depart from the ASX Recommendations, the exceptions have been identified and theBoard’s reason for an alternate approach has been explained. Where the Board supports a recommendation but is yetto fully implement a complementary policy or practices, this has also been identified.
The Company’s suite of corporate governance policies are available on the Company website at www.molymine.com.
Principle 1. Lay Solid Foundations for Management and Oversight
The Role of the Board and Management Team
The Board’s primary role is the protection and enhancement of shareholder value. The Board has established aCharter describing the role and powers of the Board, delegation of responsibil ities, the Chairman responsibil it ies,Board structure, Committees and assessment of performance.
The Board has established a framework for the management of the Company and its controlled entities, a frameworkwhich divides the functions of running the Company between the Board, the Chief Executive Officer and the seniorexecutives. The Board has put in place a system of internal control, a pro-active business risk management process,and has the task of monitoring financial performance and the establishment of appropriate ethical standards. Theagenda for meetings of the Board is prepared by the Chief Executive Officer. Standard items include the projectreports, f inancial reports, strategic matters, governance and compliance. Submissions are circulated in advance.Senior executives are regularly involved in Board discussions.
The Board is responsible for the overall corporate governance of the Company including formulating its strategicdirection, approving and monitoring capital expenditure, setting remuneration, appointing, removing and creatingsuccession policies for Directors and senior executives, establishing and monitoring the achievement of management’sgoals and ensuring the integrity of internal control and management information systems. It is also responsible forapproving and monitoring financial and other reporting.
In exercising its responsibil it ies, the Board recognises that there are many stakeholders in the operations of theCompany, including employees, customers, the government and the community.
The Board has delegated responsibil ity for the business operation and administration of the Company to the ChiefExecutive Officer and the executive management team. The management team, led by the Chief Executive Officer, isaccountable to the Board.
The Board ensures that this team is appropriately qualified and experienced to discharge their responsibil ities and hasin place procedures to assess the performance of the Chief Executive Officer and the executive management team.
In delegating the operation of the Company to the Chief Executive Officer and the executive management team, theBoard reserves the following powers to be exercised solely by the Board:
The composition, remuneration or operation of the Board of Directors Any matter resolved by a properly convened meeting of the Board of Directors Adopting, signing or otherwise endorsing reportable financial results of the Company Setting general strategic direction Matters pertaining to the Company’s auditors Appointment or removal of the Chief Executive Officer, Chief Financial Officer or Company Secretary Issuing shares, options or debentures Purchases in excess of authority level guidelines delegated to employees Contractual obligations where the Chief Executive Officer has a material personal interest Related party transactions Contractual obligations which are not consistent with (or are a consequence of) the strategic direction of the
Company Contractual obligations that incur a material liability not identified in a budget approved by the Board. Reporting to shareholders. Risk management.
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Principle 2. Structure the Board to add Value
Composit ion of the Board
The Board seeks to nominate persons for appointment to the Board that have the suitable qualifications, experienceand skills to augment the capabilities of the Board. The Board supports the principle of having a majority of Non-Executive and independent Directors on the Board, but is mindful that in the early stages of development of theCompany’s business plan, other competing priorities, which may impact on the Board’s structure, could be of greaterimportance to the shareholders in terms of preserving and growing shareholder wealth, than the independence of theDirectors.
The Board currently has 5 members including four Non-Executive Directors.
The Board will maximise Non-Executive and independent representation on the Board within the constraints of prudentmanagement practice.
In the context of Director independence, ‘materiality’ is considered from both the Group and individual Directorperspective. The determination of materiality requires consideration of both quantitative and qualitat ive elements. Anitem is presumed to be quantitatively immaterial if i t is equal to or less than 5% of the appropriate base amount. It ispresumed to be material (unless there is qualitative evidence to the contrary) if i t is equal to or greater than 10% ofthe appropriate base amount. Qualitative factors to be considered include whether a relationship is strategicallyimportant, the competitive landscape, the nature of the relationship and the contractual or other arrangementsgoverning it and other factors that point to the actual abil ity of the Director in question to shape the direction of theGroup’s decision.
A Director is deemed to be independent by the Board where they are:
A Non-Executive Director; Not a substantial shareholder, being a shareholder with a relevant interest of more than 5% of voting shares; Not a Director, officer or related party of a substantial shareholder; Not in a material contractual relationship with the company; Free from any interest and any business or other relationship which could, or could reasonably be perceived to,
materially interfere with the Director’s ability to act in the best interests of the company; and Not a Director, officer or related party of a third party dealing with the Company or professional advisor or
material consultant, to the company or material supplier.
Based on disclosure provided by the Directors to the Board, the following Directors are currently IndependentDirectors’:
The term in office, skills and experience of the Directors is detailed in the Directors’ Report.
With the prior approval of the Chairman, Directors may seek independent professional advice at the Company’sexpense.
Board Committees
Whilst at all t imes the Board retains full responsibil ity for guiding and monitoring the Company, in discharging itsstewardship it makes use of sub-committees. Specialist committees are able to focus on a particular responsibil ity andprovide informed feedback to the Board.
To this end, the Board has established the following standing committees:Audit and Risk Management Committee; andRemuneration Committee.
The roles and responsibilit ies of these committees are discussed throughout this Corporate Governance Statement.
Additional Board committees and sub-committees of any Board committee may be formed temporarily for specif icpurposes and / or to exercise specified authority of the Board.
Name Position
D Craig (Chairman) Non-Executive Director
D. Constable Non-Executive Director
M. Senft Non-Executive Director
J.D. Nixon Non-Executive Director
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The Board has established an Audit and Risk Management Committee, which operates under a charter approved bythe Board. For more information on the Audit function of the committee responsibilit ies please refer to Principle 4within this statement.
The current Audit and Risk Management Committee members are:
It is the Company's objective to provide maximum stakeholder benefit from the retention of a high quality Board andexecutive team by remunerating Directors and key executives fair ly and appropriately with reference to relevantemployment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature andamount of executive Directors' and officers' remuneration to the Company's financial and operational performance.
For a full discussion of the Company's remuneration philosophy and framework and the remuneration received byDirectors and Executives in the current year please refer to the Remuneration Report, which is contained within theDirectors' Report.
The current Remuneration Committee members are:
The standing committees have established formal charters. These charters include:
Where possible, a majority of independent Directors will make up the membership of the standing committees, Where possible, at least three members will be appointed to each standing committee, The Chairman of the Board shall not be the Chairman of a standing committee.
Board members receive A$2,500 per annum per Committee they are members of.
Recommendation 2.4 of the ASX Recommendations states that ‘the Board should establish a nomination committee’.Given the relatively small number of members on the Board and the early stage of implementation of the Company’sbusiness development plan, the Board has decided to retain the nomination of new Board members as a full Boardfunction. The Company does not currently have written policy or written policies governing the selection andappointment of new Directors, except as described in the ‘Composition of the Board’ section above.
Principle 3. Promote Ethical and Responsible Decision Making
Ethical Behaviour
The Board has endorsed a Company-wide Code of Business Conduct, which applies to all members of the Company.The code is designed to provide guidance to employees and members of the Board on the standards of behaviourexpected in the discharge of their duties on behalf of the Company.
Code of Conduct
Uphold the good reputation of the Company. Treat people with respect, courtesy and without harassment. Act fairly in dealings with other people and organisations. Behave honestly and do not provide false or misleading information. Act with integrity, in good faith, for a proper purpose and always in the best interests of the Company. Discharge your duties for the Company with care and diligence. Comply with applicable laws. Maintain Company confidentiality and protect personal privacy. Use Company resources properly and appropriately and only for the benefit of the Company.
Name Position Appointment / Resignation Date
D Craig Non-Executive Director Appointed 19 May 2009
D. Constable Non-Executive Director Continuing
J.D. Nixon Non-Executive Director Appointed 10 June 2008
Name Position Appointment / Resignation Date
D Craig Non-Executive Director Appointed 19 May 2009
D. Constable Non-Executive Director Continuing
J.D. Nixon Non-Executive Director Appointed 10 June 2008
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Always avoid and where necessary disclose actual or potential conflicts of interest. Do not improperly use ‘ins ide information’ gained from the Company to gain advantage for yourself or someone
else or to the detriment of the Company. Do not improperly use your position to gain advantage for yourself or someone else or to the detriment of the
company. Comply with reasonable and lawful direction of the Company.
The following persons are responsible for investigating reports of unethical behaviour, should the need arise:
Chairman of the Board – Investigation of a report of unethical behaviour by a Director or the CompanySecretary.
Chairman of the Audit Committee – Investigation of a report of unethical behaviour by the chairman of theBoard.
The Company Secretary – Investigation of a report of unethical behaviour by any employee of the Company ora contractor representing the Company.
Trading in the Company’s Securit ies by Directors, Off icers and Employees
The Company has a Share Trading Policy and Dealing Rule for ins iders, which provides a clear determination of whenit is appropriate for Directors, officers and employees to trade in the securities of the Company. The Company includesappropriate clauses in employment contracts and service contracts, aimed at highlighting the obligations imposed onindiv iduals. Employees are also briefed on their obligations with regard to trading in the securit ies of the Company atthe time of their induction into the Company.
Under the Company’s Securities Trading Policy, an Executive or Director must not trade in any securities of theCompany at any time when they are in possession of unpublished, price-sensitive information in relation to thosesecurities.
Before commencing to trade, an executive must f irst obtain the approval of the Company Secretary to do so and aDirector must first obtain approval of the Chairman. If the Company Secretary or Chairman is not available then theSecurity Trading Policy specifies who may approve the transaction.
As required by the ASX and TSX Listing Rules, the Company notif ies the ASX of any transaction conducted byDirectors in the securities of the Company in their absence. In addition, the Company notifies the TSX of anytransaction conducted by executives in the securities of the Company in their absence.
Principle 4. Safeguard Integrity in Financial Reporting
Audit ing
The Board has established an Audit and Risk Management Committee, as described in the section ‘Board Committees’above, which operates under a charter approved by the Board. It is the Board’s responsibil ity to ensure that aneffective internal control framework exists within the entity. This includes internal controls to deal with both theeffectiveness and eff iciency of significant business processes, the safeguarding of assets, the maintenance of properaccounting records, and the reliabil ity of f inancial information as well as non-financial considerations such as thebenchmarking of operational key performance indicators. The Board has delegated responsibility for establishing andmaintaining a framework of internal control and ethical; standards to the Audit Committee.
The number of Audit and Risk Management Committee meetings held, the Directors in attendance, and details of theCommittee members’ qualifications are detailed in the Directors’ Report.
All members of the Audit and Risk Management Committee are independent, and the Chairman of the Committee is notthe Chairman of the Board.
The Committee also provides the Board with additional assurance regarding the reliabili ty of f inancial information forinclusion of the financial reports. All members of the Committee are Non-Executive Directors.
The Chief Executive Officer and the Chief Financial Officer of the Company sign off in a certification addressed to theAudit and Risk Management Committee, which states that the Company’s financial reports present a true and fair view,in all material respects, of the Company’s financial condition and operational results and are in accordance withrelevant accounting standards. The Committee notes this written advice when considering the financial accounts of theCompany.
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Principle 5. Make Timely and Balanced Disclosure
Continuous Disc losure
The Company has adopted a Disclosure Policy in order to ensure that communication are timely, factual, accurate,complete and broadly disseminated and filed with appropriate regulations as in accordance with applicable securitieslaws. The Company’s Disclosure Committee is responsible for overseeing the Company’s Disclosure controls,procedures and practices. The Disclosure Committee consists of the Chief Executive Officer, Chief Financial Officerand Company secretary.
Simple compliance type announcements are approved for release by either the Chief Executive Officer or CompanySecretary. The Chief Executive Officer and Company Secretary are responsible for identify ing continuous disclosurematters for circulation to the Board. To ensure timely release of information, announcements are not delayed where anExecutive member is unable to be contacted to approve a release.
The Chief Executive Officer is responsible for all media contact and comment as well as all external communicationsincluding analyst briefings and shareholder responses. He delegates some of this responsibili ty to the Chief OperatingOfficer, Company Secretary and Chief Financial Officer from time to time.
The Company posts all ASX announcements on its website.
Principle 6. Respect the Rights of Shareholders
In addition to complying with ASX and statutory requirements for reporting and disclosure, the Company providescopies of all announcements, reports and topical information on its website. The website also provides a portal forshareholders and others to put questions to the Company.
The Chairman of the Board always provides the opportunity for shareholders to ask questions at general meetings andmanages the question period to allow the maximum number of shareholders to do so. The Company’s auditor is alwaysinvited to attend Annual General Meetings and is available to answer questions on audit matters.
Principle 7. Recognise and Manage Risk
Risk Management
Your Board of Directors recognise that all businesses face a myriad of risks, regardless of their commercialperformance. For an organisation to remain successful over many years, it must have a culture of proactive riskassessment and mitigation.
The Board determines the Company’s risk profile and is responsible for overseeing and approving risk managementstrategy and policies, internal compliance and internal control. The Company’s process of r isk management andinternal compliance and control includes:
establishing the Company’s goals and objectives, and implementing and monitoring strategies and policies toachieve these goals and objectives;
continuously identify ing and measuring risks that might impact upon the achievement of the Company’s goalsand objectives, and monitoring the environment for emerging factors and trends that affect these risks;
formulating risk management strategies to manage identified risks, and designing and implementing appropriaterisk management policies and internal controls;
monitoring the performance of, and continuously improving the effectiveness of, r isk management systems andinternal compliance and controls, including an annual assessment of the effectiveness of r isk management andinternal compliance control.
To this end, comprehensive practices are in place that are directed towards achieving the following objectives:
effectiveness and efficiency in the use of the Company’s resources; compliance with applicable laws and regulations; preparation of reliable published financial information.
The Audit and Risk Management Committee is responsible for undertaking and assessing risk management andinternal control effectiveness. The Board oversees an annual assessment of the effectiveness of r isk management andinternal compliance and control.
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In addition to specific reports by management to the Board on material risk, matters that have or wil l materially alterthe overall risk profi le of the Company are included in a regular compliance report regarding statutory and regulatorymatters which the Company Secretary provides to the Board at each Board meeting.
The Group outsources its f inancial risk management to an independent f inancial r isk management firm to assist withthe investment of its bank bil ls and other money market investments. The Group have an investment policy that isstrictly adhered to by the firm when providing guidance on money market investments to purchase. The Group doesnot have any exposure to asset-backed commercial paper.
CEO and CFO Certif ication
Recommendation 7.2 of the ASX Recommendations states that:
“The Chief Executive Officer … should state to the Board in writing that … the integrity of f inancial statements … isfounded on a sound system of risk management and … is operating efficiently and effectively in all material respects.”
The Chief Executive Officer and Chief Financial Officer provide a written statement to the Board that:
Their view provided on the Company’s financial report is founded on a sound system of risk management andinternal compliance and control which implements the financial policies adopted by the Board; and
that the Company’s risk management and internal compliance and control system is operating effectively in allmaterial respects.
Principle 8. Encourage Enhanced Performance
Performance Appraisal
Recommendation 8.1 of the ASX Recommendations states that:
“The performance of the Board and key executives should be renewed regularly against both measurable andqualitative indicators.”
The Chairman of the Board informally reviews the performance of individual Directors and committees. A formalevaluation process is sti ll being developed that wil l identify appropriate measurable and qualitat ive indicators for thereview of all members of the Board and its committees. The Board plan to develop a performance evaluation processfor Directors during the 2009 financial year.
The Company has a formal performance appraisal system for all executive employees. The performance of the keyexecutives is reviewed regularly against measurable and qualitat ive indicators. During the reporting period, the Boardconducted performance evaluations that involved an assessment of each key executive’s performance against specif icand measurable qualitat ive and quantitative performance criteria.
The Company has a formal induction system in place for all employees.
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20 Directors’ Report
41 Income Statement
42 Cash Flow Statement
44 Statement of Changes in Equity
46 Notes to the Financial Statements
104 Directors’ Declaration
105 Auditor’s Report
46 Corporate information
46 Summary of significant accounting policies
63 Revenue and expenses
64 Income tax
69 Cash and cash equivalents
70 Other receivables
71 Sale of Big Island Mining Limited
72 Non current assets held for sale
72 Investment in associate
74 Non current assets – assets classified as held for trading
74 Plant and equipment
76 Exploration and evaluation
80 Mine property development
82 Trade and other payables
82 Interest bearing liabilities
83 Provisions
84 Contributed equity
85 Reserves and retained earnings
86 Key management personnel
90 Earnings per share
91 Commitments and contingencies
93 Cash flow statement
94 Financial risk management
98 Related party disclosure
98 Segment information
99 Employee entitlements
99 Share based payment plans
103 Auditor’s remuneration
103 Subsequent events
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The Directors present their report together with the f inancial report of Moly Mines Limited (“Moly Mines” or the “Company”) and of the consolidated entity, being the Company and its controlled entit ies (the “Group”) for the year ended 30 June 2009, and the auditor’s report thereon. DIR E C T O R S The names and details of the Company’s Directors in office during the financial year and until the date of this report are set out below. Directors were in off ice for the entire period unless otherwise stated. Mr David Craig Non-Executive Chairman Mr Craig was appointed to the Board on 19 May 2009. Mr Craig is a lawyer who has held and holds executive and board positions in the fields of law, f inancial services and the resources industry. As a partner of a major Perth law firm, he specialised in resources and commercial legal advice, which included work on resources joint ventures, the acquis ition and disposal of interests in companies and projects, and capital raisings by companies. This was followed by ten years in the f inancial services industry as a stockbroker and an Executive Director in a national stockbroking and investment banking company. Mr Craig then spent five years work ing with Woodside Petroleum Ltd in an executive posit ion in the f ield of public and government affairs. He brings to the Board expertise in law, financial markets, stakeholder engagement, relationship management, strategic planning and r isk management. Details of Mr Craig’s Directorships over the past 3 years are: • United Minerals Corporation NL, appointed 5 May 2008, continuing • ADG Global Supply Limited, appointed 4 July 2008, continuing • Entek Energy Ltd, appointed 18 July 2008. continuing Mr Craig is a member of the Company’s Audit and Risk Management and Remuneration Committees. Dr Derek Fisher Chief Executive Officer and Managing Director Dr Fisher was appointed to the Board on 10 April 2003. Dr Fisher has over 38 years worldwide experience in the resource industry. He has been the principal in l isting a number of companies both in Australia and in Canada and has over 20 years experience as the manager of publicly listed companies. Dr Fisher has been instrumental in the development of mines and processing facilit ies in Australia, Mongolia, and Armenia, and project assessment and exploration on most continents. He began his career with the NSW Geological Survey as a trainee geologist in 1966 and following graduation from the University of New England, Armidale New South Wales, he moved into the mineral exploration and mining industry. During the 1970’s he undertook doctoral studies at the University of Toronto, Canada, gaining his PhD in 1979. Dr Fisher is an honorary l ife member of the Association of Mining and Exploration Companies (AMEC) having spent 13 years on the council of AMEC, 4 as President. Dr Fisher was appointed to the Board of Cortona Resources Limited, an associated Company, as a Non-Executive Director, on 5 July 2007. During the past 3 years, Dr Fisher has not served as a Director of any other l isted companies.
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Mr David Constable Non-Executive Director Mr Constable was appointed to the Board on 12 December 2006. Mr Constable is an exploration geologist with more than 35 years Canadian and international exploration and development experience, including managing his own geological consult ing firm for more than a decade. Since 1996, Mr Constable has provided investor relations services to international and Canadian mining companies. Mr Constable served as Vice President, Investor Relations, for Normandy Mining Limited from 1997 unti l i ts takeover by Newmont in 2002. Currently, he is Vice President, Investor Relations, for FNX Mining Company Inc. Mr Constable holds an ICD.D designation from the Canadian Institute of Corporate Directors and holds a Bachelor of Science (Hons) Geology degree and an MBA. Details of Mr Constables’ Directorships over the past 3 years are: • Aquiline Resources Inc, appointed 9 May 2002, continuing • U3O8 Corp, appointed 15 December 2006, continuing • Mr Constable was a director of Rage Energy Ltd when a cease trade order was issued in May 2007 for failure to
meet applicable fi ling deadlines. The cease trading order was lifted in October 2007, however the Company halted trading again in December 2008 and de-listed from the TSX Venture Exchange at the close of market, 13 July 2009.
Mr Constable is a member of the Company’s Audit and Risk Management and Remuneration Committees. Mr Michael Senft Non-Executive Director Mr Senft was appointed to the Board on 22 April 2008. Mr Senft was most recently Managing Director CIBC World Markets Inc, where he was head of leveraged finance capital markets, head of high yield, and head of leveraged finance origination. In these posit ions he was actively involved in final transaction approvals, s tructuring and pricing and coordinated innovative debt f inancing solutions through integrated capital markets knowledge. He oversaw High Yield Sales, Trading, Research as well as taking a direct role in originating and structuring transactions. He init iated coverage across all Investment Banking Industry sectors and managed all facets of originating and executing financings for a wide variety of issuers in energy, paper & forest products, steel, industr ial services and healthcare sectors, among others. Prior to his appointment at CIBC in 2002, Mr. Senft spent 20 years with Merril l Lynch, New York and held numerous executive roles finishing as Managing Director, Leveraged Finance. Mr. Senft holds a Masters of Business Administration, Finance, from Stern School of Business, New York and a Bachelor of Arts degree in Economics from Princeton University, Princeton, New Jersey. During the past 3 years Mr Senft has not served as a Director of any listed companies. Mr John David Nixon Non-Executive Director Mr Nixon was appointed to the Board on 10 June 2008. Mr Nixon is a Mechanical Engineer with over 40 years experience in the mining and construction industries in Australia, Southern Afr ica, New Zealand, Canada and Indonesia. His init ial training was with De Beers in the diamond industry in South Afr ica and he came to Australia in 1980 for the development of the Argyle diamond mine, the world’s largest diamond producer. He was a founding Executive of Signet Engineering in 1990, and a Director of that company until the acquis ition of Signet by Fluor Australia in 1996. From 2001 to 2004, Mr Nixon was the Project Director for a Fluor/SKM joint venture for the $1.0 bill ion BHP Bill iton Iron Ore Asset Development projects, comprising the new Area C mine, extension of the rail from Yandi to Area C, and the expansion of port facili ties at Port Hedland.
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Mr John David Nixon (Cont) Mr Nixon currently works as a consultant in the mining industry in Western Australia and is a Non-Executive Director of Swick Mining Services Limited and Non-Executive Director of Brockman Resources Limited. Details of Mr Nixon’s Directorships over the past 3 years are: • Atlas Iron Limited, appointed 30 May 2006, resigned 21 November 2008 • Swick Mining Services Limited, appointed 1 January 2007, continuing • Brockman Resources Limited appointed 23 March 2009, continuing Mr Nixon is Chairman of the Company’s Audit and Risk Management and Remuneration Committees. Mr Paul Willis Former Non-Executive Chairman Mr Willis was appointed to the Board on 27 January 2006 and appointed Chairman on 20 October 2006. He resigned on 10 March 2009. Mr Will is has extensive project analysis and capital markets experience, having spent 15 years working in the investment management industry, specialising in the resources sector. He was responsible for managing portfolios of listed Australian and international resource companies across all resource sectors, part icularly gold, base metals, bulk commodit ies and oil and gas. Mr Will is was a founding partner, Executive Director and Chief Operating Officer of JF Capital Partners Limited (“JFCP”), an institut ional funds management company based in Melbourne, Australia. JFCP was one of the fastest growing boutique fund managers in Australia in the period 2000 to 2005 with assets under management growing from $30 million to $3 bil lion. Prior to founding JFCP, Mr Will is held senior portfolio management, analyst and dealing positions with major funds management companies in Australia. Mr Will is resigned from the Board of ASX listed HFA Limited in February 2007 and ASX listed MFS Living & Leisure Trust Limited in December 2006. He has not served as a Director on any other lis ted companies in the last 3 years. Mr Willis was a member of the Company’s Audit and Risk Management and Remuneration Committees unti l his resignation from the Board. Mr Kurt Talbot Non-Executive Director Mr Talbot was appointed to the Board on 16 April 2009. He resigned on 19 May 2009. Mr Talbot was appointed to the Board pursuant to nominee r ights granted in the loan documentation with the Trust Company of the West (“TCW”) for the US$ 150M Interim Financing Facility completed late 2008. Mr Talbot is Managing Director for TCW’s Energy & Infrastructure Group (“TCW EIG”) TCW EIG manages a series of investment funds focused on global energy and infrastructure on behalf of institut ional clients. Mr Talbot began his career with Trafalgar House Oil and Gas where he held positions of Senior Engineer and Commercial Analyst based in Houston and London respectively. Mr Talbot holds a Bachelor of Science degree in Petroleum Engineering from Louisiana State University and an MBA from Texas A&M University. Mr Talbot is a Registered Professional Engineer in the State of Texas. Mr Peter Thomas Non-Executive Director Mr Thomas was appointed to the Board on 16 January 2007. He resigned on 31 July 2009. Mr Thomas holds an MBA, firs t year honours, from Harvard Business School and holds Bachelor of Economics and Bachelor of Science degrees from Macquarie Univers ity, Sydney. His strong international finance, corporate and investment banking skills have developed over the last 10 years while he served in various executive, corporate and advisory roles. Currently, Mr Thomas is a Senior Executive at Fortescue Metals Group Limited and is responsible for group financial management and commercial project performance. During 2006, Mr Thomas jointly led equity negotiations, joint venture and debt financing arrangements that culminated in Fortescue’s A$3 bill ion project financing. From 2002 to 2004, Mr Thomas was Mergers and Acquisit ions Manager for Novartis. Prior to this Mr Thomas was Vice President, Corporate Finance at Lehman Brothers in New York and London from 1998 to 2002. Mr Thomas was Chairman of the Company’s Audit and Risk Management and Remuneration Committees until his resignation from the Board.
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C O M P A NY S E C R E T A R Y Mr Andrew Worland Mr Worland, who has 15 years corporate, financial and accounting experience, was appointed Company Secretary on 8 April 2004. Mr Worland has extensive experience in the resources sector having held senior financial and commercial roles with Minara Resources Limited. Mr Worland holds a Bachelor of Commerce degree from the Univers ity of Western Australia. Mr Worland also acted as Chief Financial Off icer for Moly Mines Limited from 29 March 2004 to 13 March 2006. INT E R E S T S IN T H E S H A R E S A ND O P T IO NS O F T H E C O MP A NY As at the date of this report, the interests (directly or indirectly held) of the Directors in the shares and options of Moly Mines were: Director Ordinary Shares Options over Unissued Ordinary Shares
D. Fisher 1,103,600 780,000
D. Constable 10,000 150,000 In January 2009, the Company agreed to issue Dr Fisher, subject to shareholder approval, 520,000 new options exercisable at $0.40 per share expir ing 31 December 2010. Also in January 2009, the Company agreed to issue to Mr Constable, Mr Senft and Mr Nixon, subject to shareholder approval, 100,000 options respectively on the same terms and condit ions. Upon Mr Craig’s appointment in May 2009 the Company agreed to issue, subject to shareholder approval, 100,000 options on the same terms and condit ions. Shareholder approval for the grant of these options wil l be sought at the 2009 Annual General meeting of shareholders. Subject to shareholder approval these options wil l vest immediately. DIR E C T O R S ’ A ND E X E C U T IV E O F F IC E R S ’ R E MU NE R A T IO N Details of remuneration paid to Directors and other specified Executive Officers are set out in the Remuneration Report. DIR E C T O R S ’ ME E T ING S The number of meetings of the Board of Directors and Committees of the Board held during the year and the numbers of meetings attended by each Director were as follows:
Directors ’ Meetings Audit and Risk Management
Committee Meetings Remuneration Committee
Meetings
Attended Eligible
to Attend Attended Eligible
To Attend Attended Eligible
to Attend D Craig 1 1 - - - -
D. Fisher 14 14 - - - -
P. Thomas 13 14 3 3 1 1
D. Constable 13 14 1 1 - -
M. Senft 13 14 - - - -
J.D. Nixon 12 14 3 3 1 1
P. Willis 10 10 2 2 1 1
K. Talbot 1 1 - - - -
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R E M U NE R A T IO N R E P O R T ( A U DIT E D) This report outl ines the remuneration arrangements in place for Directors and Senior Executives of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, Key Management Personnel (“KMP”) of the Group are defined as those persons having authority and responsibil ity for planning, directing and controll ing the major activit ies of the Company and the Group, directly or indirectly, including any Director (whether Executive or otherwise) of the Parent company, and includes the five Executives in the Parent and the Group receiving the highest remuneration. For the purposes of this report, the term ‘Executive’ encompasses the Chief Executive, Senior Executives, General Managers and Secretaries of the Parent and the Group. Details of Key Management Personnel ( inc luding the highest paid Executives of the Company and Group) Name Tit le Date Appointed/Resigned
Directors
David Craig Chairman (Non-Executive) Appointed 19 May 2009
Derek Fisher Chief Executive Officer continuing
David Constable Director (Non-Executive) continuing
Michael Senft Director (Non-Executive) continuing
John David Nixon Director (Non-Executive) continuing
Paul Will is Chairman (Non-Executive) Resigned 10 March 2009
Kurt Talbot Director ( Non-Executive) Appointed 16 April 2009, Resigned 19 May 2009
Peter Thomas Director ( Non-Executive) Resigned 31 July 2009
Executive Officers Andrew Worland Company Secretary continuing
Collis Thorp Chief Operating Officer continuing
John McEvoy Chief Financial Officer continuing
Michael Gloyne General Manager – Operations continuing There were four Executive officers ( including the Company Secretary) of the Company during the f inancial year. There were no other changes of the Chief Executive Officer and Key Management Personnel after the reporting date and before the date the f inancial report was authorised for issue. R E M U NE R A T IO N C O MMIT T E E It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and Executive team by remunerating Directors ’ and key Executives fair ly and appropriately with reference to relevant employment market conditions. To assist in achiev ing this objective, the Remuneration Committee l inks the nature and amount of Directors’ and Officers ’ remuneration to the Company’s performance. The expected outcomes of the remuneration structure are: • retention and motivation of key Executives; • attraction of high quality management to the Company; and • performance incentives that allow Executives to share in the success of the Company. F
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The role of the Remuneration Committee is to: • review and determine the remuneration of the Chief Executive Officer, using independent external advice where
appropriate; • review and ratify the recommendations of the Chief Executive Officer for the remuneration of Executive
management; • agree performance targets and the procedures for administering Executive remuneration; • determine the fees to be paid to the Chairman and Non-Executive Directors; • review, approve and implement incentive based remuneration plans inc luding share and option plans; and • review and set remuneration polic ies and strategy by reference to market employment conditions. The members of the Remuneration Committee are: • Mr J.D. Nixon – Independent Non-Executive - Chairman • Mr D Constable – Independent Non-Executive • Mr D Craig – Independent Non-Executive
Mr Will is served on the Remuneration Committee unti l his resignation on 10 March 2009. Mr Thomas served as Chairman of the Remuneration Committee from 20 March 2007 until his res ignation on 31 July 2009. Where the Remuneration Committee discusses matters relating to remuneration of individual Directors, the confl icted Director abstains from that deliberation. The Company Secretary acts as secretary to the Committee. R E M U NE R A T IO N P O L IC Y A ND P H IL O S O P H Y The Remuneration Committee is responsible for determining and rev iewing compensation arrangements for the Directors, the Chief Executive Officer and the Executive team. To ensure the retention of high quality people, the Remuneration Committee assesses the appropriateness of the nature and amount of emoluments on a periodic basis by reference to relevant employment market condit ions within the following remuneration framework: • provide competitive rewards to attract high calibre Executives; • link Executive rewards to shareholder value; • transparency; and • capital management. Employees have the opportunity to part icipate in the Company’s Employee Incentive Option Scheme. The components of variable remuneration for each Executive are determined on a case-by-case basis depending on the Executive and their role and responsibili ty within the organisation. The objective for variable remuneration is to reward Executives in a manner that aligns remuneration with the interests of the Company’s shareholders. Accordingly, variable remuneration in the form of the grant of options is mostly awarded to Executives who can reasonably influence or impact the Company’s abil ity to maximise shareholder returns. Variable remuneration, provided in the form of the grant of options, has been awarded to Executives and management under the Employee Incentive Option Scheme. Whilst there are no performance related vesting conditions attached to the options, the Company considers that this form of remuneration is the most appropriate means by which to align remuneration with shareholders’ interests given the Company’s size and nature of its business activit ies. The use of variable remuneration reflects the Company’s remuneration philosophy ensuring a market competitive remuneration package is provided that incentivises, retains, attracts and rewards whilst demonstrating responsible capital management practices.
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Company Performance The overall level of compensation takes into account the growth in shareholder wealth of the Company. The chart below compares, assuming an initial investment of A$100, the yearly percentage change in the cumulative total shareholder return versus the S&P/ASX 200 Index for the Company’s six most recently completed f inancial years.
30 June 04* 30 June 05+ 30 June 06+ 30 June 07+ 30 June 08+ 30 June 09+
The Company A$100 A$185 A$186 A$605 A$474 A$85
S&P / ASX 200 Index A$100 A$121 A$144 A$178 A$148 A$112
The Company’s profit /(loss) ($231,434) ($1,561,238) ($1,209,668) ($757,131) $4,265,217 ($48,179,000)
∗ Information presented on the profit / (loss) is presented in accordance with Australian Accounting Standards applicable prior to 1 January 2005.
+ Information presented on or after 1 January 2005 is presented in accordance with Australian Accounting Standards applicable on or after 1 January 2005.
NO N-E X E C U T IV E DIR E C T O R S ’ R E M U NE R A T IO N Clause 59 (1) of the Company’s Constitution provides that Non-Executive Directors’ are entit led to receive Non-Executive Directors’ fees within the l imits approved by shareholders in general meeting. Shareholders have approved the aggregate remuneration to be paid to Non-Executive Directors at $800,000 per annum. Mr Craig was appointed to the Board on 19 May 2009 as Chairman and derives Non-Executive Director fees for his services, which comprise a base annual fee of $72,727, committee fees of $2,500 per annum per committee plus superannuation entitlements for his services. Mr Constable was appointed to the Board on 12 December 2006, also derived Non-Executive Director fees, which comprises a base annual fee of $45,000, committee fees of $2,500 per annum per committee plus superannuation entit lements for his services. Mr Senft was appointed to the Board on 22 April 2008 and derives Non-Executive Director fees, which comprise a base annual fee of $45,000 plus superannuation entit lements for his services. Mr Nixon was appointed to the Board on 10 June 2008 and derives Non-Executive Director fees, which comprise a base annual fee of $45,000, committee fees of $2,500 per annum per committee plus superannuation entitlements for his services. Mr Will is was appointed to the Board on 27 January 2006, Chairman on 20 October 2006, resigned on 10 March 2009 and derived Non-Executive Director fees, which comprised a base annual fee of $60,000 plus superannuation entit lements for his services.
0
100
200
300
400
500
600
2004 2005 2006 2007 2008 2009
(AU
D) The Company
S&P / ASX 200 Index
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Mr Talbot, who was appointed to the Board on 16 April 2009, resigned on 19 May 2009 and has not derived Non-Executive Director fees for his services. Mr Thomas, who was appointed to the Board on 16 January 2007, also derived Non-Executive Director fees, which comprised a base annual fee of $45,000, committee fees of $2,500 per annum per committee plus superannuation entit lements for his services. Non-Executive Directors appointed prior to 30 September 2007 have been granted options subject to the approval of shareholders at a general meeting. The Australian Stock Exchange Corporate Governance best practice recommendations specify that options should not be granted to Non-Executive Directors. Options have been granted to Non-Executive Directors, as the Remuneration Committee and Board believe the payment of monetary fees alone is not an adequate reward and does not provide an adequate incentive to enable the Company to attract and retain Non-Executive Directors of the requisite level of experience and qualif ications. Equity partic ipation by way of the grant of options to members of the Board is also considered appropriate to attract the high quality Board members that are required to assis t with the development of the Company and its projects. The issuing of options wil l contribute to the preservation of the Group’s cash reserves . E X E C U T IV E DIR E C T O R A ND S E NIO R M A NA G E R R E MU NE R A T IO N The Company aims to reward Executives with a level of remuneration commensurate with their posit ion and responsibil it ies within the Company in accordance with the overall remuneration philosophy. Remuneration may consist of f ixed remuneration and short term and long term variable remuneration. The level of f ixed remuneration is set at a base level that is appropriate to the posit ion and competit ive in the market. Fixed remuneration is reviewed annually by the Remuneration Committee. Variable remuneration may take the form of the grant of options and cash payments. Short-term Bonus The Company provides short-term cash bonuses to Executives. The short-term bonuses are discretionary and are based on achieving the following measures, where these are applicable to the specif ic Executive: • project development performance; • performance of the Company in meeting its various other objectives; • financial performance of the Company; and • such other matters determined by the Remuneration Committee at its discretion. During the year ended 30 June 2009, no cash bonuses were awarded to Executives and staff. The bonuses paid in the 2008 year of $220,000 were awarded in recognit ion of the advances made with the development of the Spinifex Ridge Molybdenum Project and assistance provided with fundraising. No bonuses have been awarded since year-end. Options Options granted as part of remuneration have been valued using the Black-Scholes option pric ing model, which takes account of factors such as the option exerc ise price, the current level and volati lity of the underlying share price and the time to maturity of the option and the expected l ife of options. The fair value of options granted that vest over a service period are amortised evenly over that period and recognised as an expense in the financial statements. The following assumptions were used in determining the fair value of options issued during the year:
• Dividend yield – nil • Volatil ity – 133.59% to 134.14% • Risk free interest rate – 2.63% to 2.71% • Expected l ife of option - various
Options issued to Directors, Executives and employees generally vest over a service period with the exercise prices set at above the Company share price at the date of issue. The options issued to Executive Officers and employees on 23 January 2009 and 18 February 2009 vested immediately due to these options being intended to replace options that expired on 31 December 2008 and recognise past performance and contr ibutions to the Company.
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The Company issued 1,793,000 employee options on 23 January 2009 and 182,000 employee options on 18 February 2009. Also on 23 January 2009 the Company agreed to issue a further 920,000 options to the Chief Executive Officer and Non-Executive Directors subject to shareholder approval. The options to be issued to the Chief Executive Officer and 4 Non-Executive Directors do not include a service condit ion as they are designed to replace options that lapsed unexerc ised on 31 December 2008. Shareholder approval for the issue of these Director options will be sought at the 2009 Annual General meeting of shareholders. The Board of Directors’ considers that in view of the f inancial legal and other responsibili ties assumed by Directors’ of public companies, the payment of monetary fees alone is not an adequate reward and does not provide an adequate incentive to enable the Company to attract and retain Board members and Executive Directors of the requis ite level of experience and qualif ications. The Board of Directors considers that equity participation by way of the grant of options to members of the Board is appropriate for these purposes. In addition, the Board considers that the issuing of options wil l contr ibute to the preservation of the Company cash reserves. The purpose of the grant of options is to provide an incentive to the Directors to continue to be dedicated and committed to the Company and to maximize their efforts to the benefit of shareholders generally. The vesting and expiry terms of the options are consistent with the terms of options issued to all exist ing employees and are priced above prevail ing share market prices. As part of the terms and condit ions of employment, the Company does not permit Executives to enter into arrangements l imiting their exposure to risk in relation to the unvested awards Performance Bonuses In December 2007, the Remuneration Committee granted performance bonuses to the three key Executives to be paid on achieving full financing of the Spinifex Ridge Molybdenum Project or upon the successful takeover of the Company or merger with a third party (whether by takeover or scheme of arrangement). These bonuses were granted as an incentive to achieve a difficult target that will take significant input and assist the development of one of the world’s leading new primary Molybdenum Projects. In January 2009, the Remuneration Committee confirmed this commitment for these bonuses to be paid. The amounts of the bonuses payable are:
Name Position Amount
(Min – Max) Mr Thorp Chief Operating Officer 0 - $637,500
Mr McEvoy Chief Financial Officer 0 - $453,333
Mr Worland Company Secretary 0 - $396,667 No obligation has been recognised and no portion of the bonuses have vested to date as financing for the Project is planned for 2010. No amounts have been forfeited in the current or prior periods. Service Agreements Remuneration and other terms of employment for Directors and specified off icers are formalised in service agreements or employment contracts. The major provisions of the agreements relating to remuneration are as follows: Directors Mr Craig Term of agreement – unspecif ied, subject to the Company’s constitution. Base Salary - $72,727 plus 10% superannuation. Committee Fee - $5,000 ($2,500 per committee) plus 10% superannuation. No termination benefit is specif ied in the agreement. Conditions rev iewed annually by Remuneration Committee. F
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Dr Fisher Term of agreement – unspecif ied. Base Salary - $660,000. Payment of a benefit of 6 month’s base salary on termination by the Company, other than for gross misconduct. I f Dr Fisher wishes to terminate the contract, he must also give s ix months notice. Conditions rev iewed annually by Remuneration Committee. Salary increased to the current amount from 1 July 2008. Mr Constable Term of agreement – unspecif ied, subject to the Company’s constitution. Base Salary - $45,000 plus 10% superannuation. Committee Fee - $5,000 ($2,500 per committee) plus 10% superannuation No termination benefit is specif ied in the agreement. Conditions rev iewed annually by Remuneration Committee. Mr Senft Term of agreement – unspecif ied, subject to the Company’s constitution. Base Salary - $45,000 plus 10% superannuation. No termination benefit is specif ied in the agreement. Conditions rev iewed annually by Remuneration Committee. Mr Nixon Term of agreement – unspecif ied, subject to the Company’s constitution. Base Salary - $45,000 plus 10% superannuation. Committee Fee - $5,000 ($2,500 per committee) plus 10% superannuation No termination benefit is specif ied in the agreement. Conditions rev iewed annually by Remuneration Committee. Mr Thomas (resigned 31 July 2009) Term of agreement – unspecif ied, subject to the Company’s constitution. Base Salary - $45,000 plus 10% superannuation. Committee Fee - $5,000 ($2,500 per committee) plus 10% superannuation. No termination benefit is specif ied in the agreement. Conditions rev iewed annually by Remuneration Committee. Executive Officers Mr Worland Terms of agreement – unspecified. Base salary - $280,000 plus 10% superannuation. Payment of a benefit of 1 month’s base salary on termination (other than for gross misconduct) by the Company or 3 months base salary in the event this occurs before 1 November 2010. Conditions rev iewed annually by Remuneration Committee. Salary increased to the current amount from 1 July 2008. Mr Thorp Terms of agreement – unspecified. Base salary - $450,000 plus 10% superannuation. Payment of a benefit of 3 month’s base salary on termination (other than for gross misconduct) by the Company, or 3 months base salary in the event this occurs before 1 November 2010. Conditions rev iewed annually by Remuneration Committee. Salary increased to the current amount from 1 July 2008. Mr McEvoy Terms of agreement – unspecified. Base salary - $320,000 plus 10% superannuation. Payment of a benefit of 1 month’s base salary on termination (other than for gross misconduct) by the Company, or 3 months base salary in the event this occurs before 1 November 2010. Conditions rev iewed annually by Remuneration Committee. Salary increased to the current amount from 1 July 2008. F
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Mr Gloyne Terms of agreement – unspecified. Base salary - $230,000 plus 10% superannuation. Payment of a benefit of 1 month’s base salary on termination (other than for gross misconduct) by the Company or 3 months base salary in the event this occurs before 1 November 2010. Conditions rev iewed annually by Remuneration Committee. Salary increased to the current amount from 1 July 2008. Unvested options terminate upon resignation in accordance with the Employee Incentive Option Scheme or under the contract or terms on which the options were granted. The Remuneration Committee meet at least once per year. The increase in remuneration for the Chief Executive Officer was discussed at Remuneration Committee meetings and approved by the Board by circular resolution. Directors ' and Executive Officers’ Remuneration Details of the nature and amount of each major element of the remuneration of each Director of the Company and each of the specified Executive officers of the Company for the f inancial year ended 30 June 2009 are set out below. Base remuneration relates to the period during which the employee was a Director or Executive officer of the Company.
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Remuneration of Key Management Personnel and the f ive highest paid Executives of the Company and the Group.
Table 1: Remuneration for the year ended 30 June 2009 Short Term Post Employment Long Term
Share Based
Payment Total Performance
Related
2009 Year Base
Remuneration Bonus Super
Contributions Retirement
Benefits Incentive
Plans
Long Service Leave
$ $ $ $ $ $ $ $ %
Executive Director
D. Fisher 660,000 - - - - - 114,392 774,392 -
Non-Executive Directors D. Craig 9,168 - 917 - - - - 10,085 - D. Constable 52,838 - 2,641 - - - 30,180 85,659 - M. Senft 41,369 - 4,137 - - - - 45,506 - JD. Nixon 45,821 - 4,582 - - - - 50,403 - P. Thomas ( i) 45,000 - 4,500 - - - 36,216 85,716 - P. Willis( ii) 44,519 - 4,452 - - - (54,324) (5,353) - K. Talbot (i ii) - - - - - - - - -
Executive Officers - A. Worland 280,000 - 28,000 - - - 57,381 365,381 - C. Thorp 450,000 - 45,000 - - - 65,381 560,381 - J. McEvoy 320,000 - 32,000 - - - 44,796 396,796 - M. Gloyne 230,000 - 23,000 - - - 39,534 292,534 -
Total 2,178,715 - 149,229 - - - 333,556 2,661,500 -
(i) Mr Thomas res igned 19 July 2009. (ii) Mr Will is resigned 10 March 2009. 180,000 of his options did not vest prior to his resignation. (ii i) Mr Talbot was appointed to the Board pursuant to nominee r ights granted in the loan documentation with the Trust
Company of the West for the US$150M Interim Financing Facili ty completed in late 2008. No remuneration was payable. He resigned on 19 May 2009.
Insurance premiums paid for Directors and Officers insurance for the year ended 30 June 2009 totalled $169,991 (2008: $119,720). These premiums are not allocated to individuals and consequently have not been included in the above table.
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Table 2: Remuneration for the year ended 30 June 2008
Short Term Post Employment Long –term Share Based
Payment Total Performance
Related
2008 Year Base
Remuneration Bonus
Super Contributions
Retirement Benefits
Incentive Plans
Long Service Leave
$ $ $ $ $ $ $ $ %
Executive Director
D. Fisher 385,000 200,000 - - - - 184,399 769,399 25.99
Non-Executive Directors
P. Willis 60,000 - 6,000 - - - 58,380 124,380 - P. Thomas 40,000 - 4,000 - - - 58,380 102,380 - D. Constable 50,110 2,505 - - - 48,650 101,265 - C. Agnew(i) (ii) 28,564 - 2,856
- - - - 31,420 -
M. Senft - - - - - - - - - JD. Nixon - - - - - - - - -
Executive Officers
A. Worland 180,000 - 18,833 - - - 83,584 282,417 - C. Thorp 262,500 - 27,812 - - - 87,565 377,877 - J. McEvoy 210,000 - 21,917 - - - 63,296 295,213 - M. Gloyne 210,000 20,000 21,167 - - - 58,380 309,547 6.46
Total 1,426,174 220,000 105,090 - - - 642,634 2,393,898 9.19
(i) Mr Agnew was appointed 17 September 2007 and resigned on 31 May 2008. ( ii) Mr Agnew’s 2008 share based payment has
been corrected to reflect his forfeiture of options.
Table 3: Compensation options: Granted and vested during the year (Consolidated)
Granted No.
Grant Date
Fair value per option at
grant date
Exercise price per
option (note 26)
Expiry Date
First Exercise
Date
Last Exercise
Date
Vested No.
Vested %
Executive Officers A. Worland 200,000 23-Jan-
0.11 0.40 31-Dec-
23-Jan-09 31-Dec-
200,000 100
C. Thorp 400,000 23-Jan-
0.11 0.40 31-Dec-
23-Jan-09 31-Dec-
400,000 100 J. McEvoy 200,000 23-Jan-
0.11 0.40 31-Dec-
23-Jan-09 31-Dec-
200,000 100
M. Gloyne 120,000 23-Jan-
0.11 0.40 31-Dec-
23-Jan-09 31-Dec-
120,000 100
Total 920,000 920,000
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During the f inancial year no options were exercised by key management personnel to acquire fully paid ordinary shares. The options issued to the Directors during the 2008 financial year were approved by shareholders at General Meeting held on 27 November 2007. The options can be exercised at any t ime after the vesting date and prior to the expiry date. Mr Agnew resigned on 31 May 2008, prior to the 30 June 2009 vesting date for the second tranche of 200,000 options. Options Granted as Part of Remuneration during the Year Ended 30 June 2009
Value of options granted during
the year
Value of options lapsed during
the year(i)
Value of options exercised
during the year
Number of options vested during the
year (i i)
% of Remuneration consisting of
options for the year Directors
D Craig - - - - -
D Fisher - - - 780,000 14.8%
P Thomas - - - 180,000 42.3%
J D Nixon - - - - -
D Constable - - - 150,000 35.2%
P Willis - - - - -
K Talbot - - - - -
Executive Officers
A. Worland 22,120 - - 500,000 15.7%
C. Thorp 44,240 - - 1,000,000 11.7%
J. McEvoy 22,120 - - 500,000 11.3%
M. Gloyne 13,272 - - 300,000 13.5%
(i) The options forfeited by Mr Willis during the year had no intrinsic value. (ii) The number of options vested during the year includes options that were granted during prior years.
In January 2009, the Company agreed to issue Dr Fisher, subject to shareholder approval, 520,000 new options exercisable at $0.40 per share expiring 31 December 2010. Also in January 2009 the Company agreed to issue to Mr Constable, Mr Senft and Mr Nixon, subject to shareholder approval, 100,000 options respectively on the same terms and condit ions, Upon Mr Craig’s appointment in May 2009 the Company agreed to issue, subject to shareholder approval, 100,000 options on the same terms and conditions. Shareholder approval for the grant of these options will be sought at the 2009 Annual General Meeting of shareholders. Shares Issued on Exerc ise of Compensation Options by Directors and Executive Officers (Consolidated).
Paid per share Shares Issued (note 19) Unpaid per share No. $ $
2009 Year Nil - -
2008 Year
P Thomas 120,000 1.40 - End of Remuneration Report.
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S H A R E O P T IO NS Unissued shares
As at the date of this report, there were 5,601,000 options over 5,601,000 unissued ordinary shares in the Company (6,155,000 options at the reporting date) and there were 17,874,118 warrants over 17,874,118 unissued ordinary shares in the Company. Refer to note 27 in this report for further details of the options outstanding and note 15 for details of the warrants outstanding. Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate. Shares issued as a result of the exercise of options
During the f inancial year 7,500,000 options were exercised to acquire 7,500,000 fully paid ordinary shares in the Company at an exercise price of $0.20 per share. No options were exercised by key management personnel. Since the end of the financial year to the date of this report, 554,000 options were exercised to acquire 554,000 fully paid ordinary shares. Since the end of the f inancial year and as at the date of this report, no additional options have been granted. O P E R A T ING A ND F INA NC IA L R E V IE W Principal Activities The princ ipal activ ity of the Group during the year was the exploration, evaluation and development of the Group’s Spinifex Ridge Molybdenum Project and the Spinifex Ridge Iron Ore Project. Result from Operations The net loss after taxation attr ibutable to the members of the Group for the year to 30 June 2009 was $48,179,000 (net profit of 2008: $4,265,000). The basic loss (2008: net profit) per share for the Group for the year was 54.2 cents per share (net profit of 2008: 5.65 cents per share) and the diluted loss per share was 54.2 cents per share (net profit of 2008: 5.07 cents per share). Since the Company’s incorporation in January 2003 and since lis ting on the ASX in March 2004, the Company’s financial performance and result has been, and wil l continue to be, attr ibutable to its ongoing exploration, evaluation and planned development activit ies on its ground holdings. Corporate Moly Mines is a Company limited by shares that is incorporated and domiciled in Australia and is l isted on the Australian Securit ies Exchange and the Toronto Stock Exchange. At the date of this report, the Company had 94,245,677 ordinary shares on issue and 5,601,000 options outstanding over 5,601,000 unissued shares. Financial Position The Company and Consolidated Entity have achieved net losses after tax for the year ended 30 June 2009, mostly result ing from the impairment of the value of Spinifex Ridge long lead plant and equipment held for resale and finance costs expensed on the f inancing fac il ity held with various funds associated with the Trust Company of the West (“TCW”). These losses have been partially offset by the unrealised foreign currency gains on the $US150.000 mill ion (A$184.865 million) loan due to an increase in the US dollar exchange rate. During the year ended 30 June 2009, the Consolidated Entity has incurred cash outflows of $3,150,000, $60,316,000 and $113,068,000 respectively on exploration and evaluation expenditure, mine property development costs and acquisition of plant and equipment. At balance date, the Company and Consolidated Entity had cash and cash equivalents of $64,012,000, trade and other payables of $21,142,000 and interest bearing liabil it ies of $205,644,000. In September 2008 the Company completed a fully secured US$150 mill ion (30 June 2009: A$184.865 million) Interim Financing Facil ity with TCW. The Interim Financing Facili ty was designed to bridge the Company’s development expenditure for the Spinifex Ridge Molybdenum Project whilst efforts were made to complete full financing for the project. At the time molybdenum prices were in excess of US$30/lb and it was the intention to repay the facili ty via full project funding of the project or have the facility subordinated and restructured into a full funding package. The Interim Financing Facil ity, including accrued interest (compounded at 20% per annum), of approximately US$183 mill ion was due for repayment by 31 October 2009. In September 2009, the Company agreed a Restructure Term Sheet with TCW
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that included an immediate one month extension of the maturity date to 30 November 2009, increasing the amount due to approximately US$186 mill ion. The terms of the proposed restructure include the repayment of excess funds in the Company estimated at US$43 million. The maturity of the remaining forecast balance outstanding of US$143 mill ion is to be reset with the following maturity dates:
• US$40 million due 30 April 2009; • US$83 million due 31 October 2011; and • US$20 million due 31 October 2014.
The coupon for the remaining US$143 million wil l be 15% per annum. A condition of the restructured facility is that the Company complete an equity f inancing of a minimum US$25 million. This amount will be retained by the Company to develop and bring into production the Spinifex Ridge Iron Ore Project, complete final feasibil ity, engineering and design studies on a 10 million tonne per annum Spinifex Ridge Molybdenum Project, and also for working capital and general corporate expenses. The Company lodged a preliminary short form prospectus on 3 September 2009 and immediately commenced a public equity offering process to raise at least US$25 mill ion that would allow the completion of the restructure of the Interim Financing Facili ty. R E V IE W O F O P E R A T IO NS A ND P R O J E C T DE V E L O P ME NT A C T IV IT IE S
The highlights of the Company’s project activities during the year and to the date of this report can be summarised as follows:
Financing
Interim Financing
Full details of the Company’s Interim Financing Facili ty are set out in the Financial Position section of this report.
Spinifex Ridge Molybdenum Project
In July 2008 the Company announced a 43% increase in the Spinifex Ridge Molybdenum/Copper Project’s Proven and Probable Ore Reserve to 451 mill ion tonnes @ 0.05% Mo and 0.08% Cu, being suff icient to support an initial 23 years of the planned 20 mill ion tonne per annum mine.
In August, the Western Australian government confirmed that the Project could proceed subject to environmental management condit ions. This was the f inal permit required to commence on-site development and construction activit ies.
In the fourth quarter of 2008 molybdenum prices fell dramatically and the Company initiated a cost reduction program across all activit ies to conserve its cash resources. The Company also commenced an advanced engineering study for a smaller scale start up development for the Project. The study was completed in April 2009 and demonstrated a signif icantly reduced capital hurdle for the Project whilst maintaining attractive f inancial fundamentals. The highlights of the study inc lude:
• 10 million tonnes per annum throughput rate • 24 years initial mine l ife • 0.07% Molybdenum head grade (and 0.11% Cu head grade)for f irst 10 years • A$ 528 million capital cost • US$7.80/lb Molybdenum operating cost; and • A$461 mill ion pre tax NPV On 8 October 2008, the Company announced the completion of a gas supply agreement with Santos (BOL) Pty Ltd for the provision of gas for power generation for the Spinifex Ridge Molybdenum Project. During the course of 2009 and subsequent to 30 June 2009, the Company took delivery of key long lead equipment required for the 20 mill ion tonne per annum Project at a cost of over A$140 million. However, the Company considers that the 10 mill ion tonne per annum project scale is the most likely init ial development option and has commenced an asset divestment process for that equipment which is surplus to this development scenario. Proceeds from asset sales wil l be used to part repay the remaining US$143 mill ion Interim Financing Facil ity described above.
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Spinifex Ridge Iron Ore Project
In September 2009, the Company completed a Pre-Feasibili ty Study (“PFS”) for the Spinifex Ridge Iron Ore Project that successfully demonstrated the viabil ity of a 1 mil lion tonne per annum open cut mining and processing operation. The PFS was based on the following Mineral Resource, which was announced in June 2009:
Classification Tonnes Fe% SiO2% Al2O3 P% S% LOI%
Indicated 6,110,000 58.9 8.5 1.7 0.15 0.006 4.7 In addition there is a further 1.2 mil lion tonnes of Inferred Resource at 57.2% Fe, while recent dri ll ing and geological mapping and prospecting has found further occurrences of iron mineralisation (refer June 2009 Quarterly Report), none of which are considered by the PFS. Financial analysis of the Project has been run only on the 5.2 mil lion tonne of Indicated Mineral Resources within the pit shells. The only remaining material approval required for the Spinifex Ridge Iron Ore Project is the acceptance of a mining proposal, approval for which is anticipated by the end of 2009. On the basis that the Company concludes a successful equity financing for a minimum of US$25 mill ion, the construction is expected to commence in 1st quarter 2010, with f irst production to commence 2nd quarter 2010. Approval has been received from the Port Hedland Port Authority for the export of Iron ore from its new Utah Point bulk commodity export facility. The Utah Point facility is currently under construction and on-schedule for completion during 2nd quarter 2010. The Company has been allocated an initial 0.8 mil lion tonnes per annum iron ore capacity for 20 months commencing July 2010. Mine Statist ics
Unit Base Case
Life of mine Years 5+
Capital cost A$’M 9.4
Pre-strip commences Date Q1 2010
First ore production Date Q2 2010
First shipment Date Q3 2010
Mining and processing rate mt/a 1.0
Ore tonnes mined ‘000 5,200
Waste tonnes mined ‘000 15,574
Strip ratio X 3.0
Average Fe grade Fe% 59.4
Lump/Fines ratio X 40/60
Mining cost A$/t 9.7
Crushing costs A$/t 4.1
Haulage costs A$/t 19.2
Port costs A$/t 7.5
Site administration & overhead A$/t 5.2
Total operating cost A$/t 45.7 Cost Estimates
Total capital cost, before contingencies, for the 1mt/a development is estimated at A$9.400 million. A further A$2.400 mill ion ship loading prepayment will be made to reserve stockpil ing and shipping capacity at the Utah Point facil ity. Total operating cost is estimated at A$45.70/t ore mined (FOB Port Hedland) and has been generated variously from third party quotes and in-house development studies.
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Financial Evaluation
The Project has been modeled at various iron ore prices net of sales discounts and commissions estimated to reflect ore quality. Moly Mines believes it has carry forward tax losses of approximately A$60 million to be util ised against future iron ore revenues.
Unit Benchmark Prices
Flat
3 Year Benchmark Average ( i)
5 Year Benchmark Average(i)
Commodity Analyst
Forecast (i i)
100% Spot Fines Price Flat
Gross revenue US$/t 51.4 60.0 49.3 49.7 58.4
Commission US$/t (2.1) (2.4) (2.0) (2.0) (2,3)
Royalties US$/t (3.2) (3.7) (3.2) (3.1) (3.6) Net revenue received US$/t 46.2 53.9 45.8 44.6 52.5
Net revenue A$’000 319,292 372,272 316,390 307,532 362,223
Net pre-tax project cashflow A$’000 67,680 120,660 64,778 55,921 110,611
Post tax IRR % 68.6 121.3 65.7 76.2 111.7 (i) 5 year and 3 year averages to 30 June 2009 (ii) Spot price per Metal Bulletin Iron Ore Index 27 August 2009 quoted on a CFR China basis for US$83.85/t. (ii i) Foreign exchange rates use an A$:US$ rate over the life of the project based on the forward curve at 13 August 2009. B U S INE S S S T R A T E G IE S A ND P R O S P E C T S The Company’s primary assets are the Spinifex Ridge Molybdenum Project and the Spinifex Ridge Iron Ore Project, both of which are within the Company’s existing mining leases. The Company plans to develop and operate an open-pit mine and a nearby processing plant for the Spinifex Ridge Molybdenum Project that, over the f irst ten years is expected to produce an average of approximately 12 million pounds of contained molybdenum and approximately 14 million pounds of contained copper, both in concentrate form. Molybdenum prices after fall ing to a low of approximately US$8 per lb in the first half of 2009 recently strengthened to approximately US$17 per lb. The updated budget for the capital cost of the Spinifex Ridge Molybdenum Project at an initial 10 million tonne per annum throughput rate is approximately $600 mill ion after crediting the value of equipment already purchased and engineering completed. Subject to the state of the f inancial markets, the Company is planning to complete full project f inancing during the first half of the 2010 calendar year through a combination of debt and equity . Following the completion of the minimum US$25 million equity financing discussed above, the Company is planning to develop the Spinifex Ridge Iron Ore Project during the 2010 financial year and plans first sales to coincide with the opening of the Utah Point export facili ties at Port Hedland in July 2010. S IG NIF IC A NT C H A NG E S IN T H E S T A T E O F A F F A IR S All signif icant changes in the state of affairs of the Group during the year are discussed in detail above under the Operating and Financial Review section. DIV IDE NDS The Directors of Moly Mines have resolved not to recommend a dividend for the year ended 30 June 2009. No dividends were declared or paid during the year.
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DIRECTORS’ REPORT
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S IG NIF IC A NT E V E NT S A F T E R T H E B A L A NC E DA T E Other than stated above under Review of Operations and Project Development Activit ies, there has not arisen in the interval between the end of the financial year and the date of this report any other item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect signif icantly the operations of the Group, the results of those operations or the state of affairs of the Group, in future f inancial years . L IK E L Y DE V E L O P ME NT S A ND E X P E C T E D R E S U L T S Likely future developments in the operations of the Group are referred to elsewhere in the Financial Report and Annual Report. Other than referred to elsewhere in this report and announcements to the Australian and Toronto Stock Exchanges, further information as to likely developments in the operations of the Group and expected results of those operations would, in the opinion of the Directors, be speculative and prejudicial to the interests of the Company and its shareholders. E NV IR O NM E NT A L R E G U L A T IO N A ND P E R F O R M A NC E The Group is subject to signif icant environmental regulation in respect to its exploration and development activities. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and complies with all environmental legislation. The Directors of the Group are not aware of any breach of environmental legislation for the period under review. INDE M NIF IC A T IO N A ND INS U R A NC E O F DIR E C T O R S A ND O F F IC E R S The Company has made an agreement to indemnify all the Directors and Officers of the Company against all losses or liabil it ies incurred by each Director and off icer incurred in good faith in the ordinary course of business in their capacit ies as Directors and Officers of the Company. During or since the financial year, the Company has paid premiums in respect of a contract insuring all the Directors of Moly Mines Limited against legal costs incurred in defending proceedings for conduct involving: • A wilful breach of duty. • A contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations
Act 2001. The total amount of insurance contract premiums paid was $169,991 (2008: $119,720). R O U NDING The amounts contained in this report and in the financial report have been rounded to the nearest $’000 (when rounding is applicable) under the option available to the Company under ASIC CO 98/0100. The Company is an entity to which the class order applies.
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NO N-A U DIT S E R V IC E S The following non-audit services were provided by the Company’s auditors Ernst & Young. The Directors are satisfied that the provision of non-audit serv ices is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive $149,939 from the provision of non-audit services including tax compliance, tax planning, due diligence and corporate services. Signed in accordance with a resolution of the Directors. D. Fisher Director Perth 29 September 2009
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INDEPENDENT AUDITOR’S REPORT
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INC O ME S TAT E ME N T FOR THE YEAR ENDED 30 JUNE 2009
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Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
Notes A$’000 A$’000 A$’000 A$’000 Interest revenue 3 835 3,551 567 3,551 Other income 3 38 7,216 38 7,006 Foreign currency gains 23,917 - - - Expenses:
Administrative expenses 3 (4,344) (2,560) (4,284) (2,560)
Loss on re-measurement of non-current assets held for sale 8 (38,916) - - -
Security deposit expenses written off (1,000) - - -
Impairment of intercompany receivables - - (44,901) -
Impairment of capital work in progress (11)(i i) (5,631) - - -
Reversal of impairment / (impairment) of Investment in associate 9(b) 54 (1,620) (120) (1,740)
Fair value movement of options held in associate 10 (a) (459) (1,963) (459) (1,963)
Share of loss of associate 9(b) (174) (120) - -
Foreign currency losses - - (157) -
Exploration expenses written off 12 (181) (225) (181) (225)
Finance Costs 3 (24,248) (14) (614) (14) Profit / (loss) before income tax
(50,109) 4,265 (50,111) 4,055
Income tax benefit 4 1,930 - 1,930 -
Net profit / ( loss) after income tax
(48,179) 4,265 (48,181) 4,055 Earnings per share for profit / (loss)from continuing operations attr ibutable to the ordinary equity holders of the Company: Basic earnings / (loss) per share (cents per share)
20 (54.2) 5.65
Diluted earnings / ( loss) per share (cents per share)
20 (54.2) 5.07
The above income statement should be read in conjunction with the accompanying notes
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CASH FLOW STATEMENT FOR THE YEAR ENDED 30 June 2009
42
Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
Notes A$’000 A$’000 A$’000 A$’000
Cash flows from operating activ ities Payments to suppliers and employees (3,900) (1,729) (3,825) (1,729)
Borrowing costs (17) (14) (17) (14)
Receipt of government grants - 75 - 75
Receipts from rent 38 - 38 -
Net cash f lows from / (used in) operating activ ities 22 (3,879) (1,668) (3,804) (1,668)
Cash flows from investing activities Payments for security deposits (2,721) (726) - (726)
Proceeds from security deposits 188 225 188 225
Payments for exploration and evaluation activ it ies (3,150) (14,775) - (396)
Payments for mine property development activities (60,316) (20,721) - -
Interest received 1,271 3,235 101 3,235
Loans to subsidiaries - - (46,484) (69,539)
Proceeds on disposal of subsidiary 7 - 5,000 - 5,000
Proceeds from disposal of plant and equipment 12 12 12 12
Payments for plant and equipment (113,068) (34,917) (108) (478)
Net cash outflows from / (used in) investing activ ities
(177,784) (62,667) (46,291) (62,667)
Cash flows from financing activit ies Proceeds from the issue of shares - 88,000 - 88,000
Proceeds from the exercise of options 1,500 701 1,500 701
Payments for share issue costs 284 (4,363) 284 (4,363)
Proceeds from notes 217,159 - - -
Payments of transaction costs relating to the notes (12,950) - - -
Finance lease principal repaid (248) (88) (248) (88)
Net cash inflows from / (used in) f inancing activities
205,745 84,250 1,536 84,250
Net foreign exchange difference (8,663) - - - Net increase / (decrease) in cash and cash equivalents
24,082 19,915 (48,559) 19,915
Cash and cash equivalents at beginning of the year 48,593 28,678 48,593 28,678
Cash and cash equivalents at end of the year 5 64,012 48,593 34 48,593
The above cash flow statement should be read in conjunction with the accompanying notes For
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B A L A N C E S H E E T FOR THE YEAR ENDED 30 JUNE 2009
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Consolidated Parent
Note 30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$’000
Current Assets Cash and cash equivalents 5 64,012 48,593 34 48,593 Other receivables 6 1,046 3,010 1,020 3,010 65,058 51,603 1,054 51,603 Non-current assets c lassified as held for sale 8 73,237 - - -
Total Current Assets 138,295 51,603 1,054 51,603 Non-Current Assets Investment in associate 9(a) 1,980 2,100 1,980 2,100 Financial assets-held for trading 10 72 531 72 531 Other receivables 6 2,005 362 113,330 134,258 Plant and equipment 11 60,126 43,443 411 646 Exploration and evaluation 12 4,255 641 - 641 Mine property development 13 135,919 91,099 - -
Total Non-Current Assets 204,357 138,176 115,793 138,176
Total Assets 342,652 189,779 116,847 189,779 Current Liabilit ies Trade and other payables 14 21,142 32,433 885 32,433 Interest bearing liabil it ies 15 205,567 247 19 247 Provis ions 16 380 390 380 390
Total Current Liabilit ies
227,089 33,070 1,284 33,070 Non-Current Liabil it ies Interest bearing liabil it ies 15 77 96 77 96
Total Non-Current Liabil it ies
77 96 77 96
Total Liabil it ies
227,166 33,166 1,361 33,166
Net Assets 115,486 156,613 115,486 156,613
Equity Contributed equity 17 154,960 153,177 154,960 153,177 Reserves 18 8,200 2,931 8,200 2,931 Retained earnings /(Accumulated losses) 18 (47,674) 505 (47,674) 505
Total Equity
115,486 156,613 115,486 156,613
The above balance sheet should be read in conjunction with the accompanying notes
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Contributed Equity
Retained Earnings /
(Accumulated Losses)
Other Reserves
Total Equity
$’000 $’000 $’000 $’000 CONSOLIDATED
At 1 July 2007 68,644 (3,760) 1,491 66,375
Profit / (Loss) for the year - 4,265 - 4,265
Total income and expense for the year - 4,265 - 4,265
Equity Transactions
Issue of share capital 88,000 - - 88,000
Cost of share issue (4,168) - - (4,168)
Exercise of options 701 - - 701
Share Based Payments
- Charged to income statement - - 288 288
- Charged to exploration and evaluation - - 738 738
- Charged to mine property development - - 414 414
At 30 June 2008 153,177 505 2,931 156,613
At 1 July 2008 153,177 505 2,931 156,613
Profit /(loss) for the year - (48,179) - (48,179)
Total income and expense for the year - (48,179) - (48,179) Equity Transactions
Exercise of options 1,500 - - 1,500
Cost of share issue 283 - - 283
Warrants issued net of tax - - 4,505 4,505
Share Based Payments
- Charged to income statement - - 327 327
- Charged to mine property development - - 437 437
At 30 June 2009 154,960 (47,674) 8,200 115,486 The above statement of changes in equity should be read in conjunction with the accompanying notes
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S TAT E ME N T O F C H A N G E S IN E Q U IT Y FOR THE YEAR ENDED 30 JUNE 2009
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Contributed
Equity Retained Earnings/
(Accumulated Losses)
Other Reserves
Total Equity
$’000 $’000 $’000 $’000
COMPANY At 1 July 2007 68,644 (3,550) 1,491 66,585 Profit for the year - 4,055 - 4,055
Total income and expense for the year - 4,055 - 4,055
Equity Transactions
Issue of share capital 88,000 - - 88,000
Cost of share issue (4,168) - - (4,168)
Exercise of options 701 - - 701
Share Based Payment
- Charged to income statement - - 288 288
- Charged to exploration and evaluation - - 738 738
- Charged to mine property development - - 414 414
At 30 June 2008 153,177 505 2,931 156,613
At 1 July 2008 153,177 505 2,931 156,613
Loss for the year - (48,179) (48,179)
Total income and expense for the year - (48,179) - (48,179) Equity Transactions
Exercise of options 1,500 - - 1,500
Cost of share issue 283 - - 283
Warrants issued net of tax - - 4,505 4,505
Share Based Payment
- Charged to income statement - - 327 327
- Charged to mine property development - - 437 437
At 30 June 2009 154,960 (47,674) 8,200 115,486
The above statement of changes in equity should be read in conjunction with the accompanying notes
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NO T E S T O T H E F IN A NC IA L S T A T E ME NT S FOR THE YEAR ENDED 30 JUNE 2009
46
1. C O R P O R A T E INF O R MA T IO N The f inancial report of Moly Mines Limited (“Moly Mines” or the “Company”) for the financial year ended 30 June 2009 was authorised for issue in accordance with a resolution of the Directors on 28 September 2009. Moly Mines is a Company l imited by shares incorporated in Australia whose shares are publicly traded on both the Australian Securit ies Exchange and the Toronto Stock Exchange. The nature of the operations and principal activities of Moly Mines Limited is the exploration and development of base and precious metals projects. 2. S U MMA R Y O F S IG NIF IC A NT A C C O U NT ING P O L IC IE S Basis of Preparation The financial report is a general purpose f inancial report which has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis except for derivative financial instruments, which have been measured at fair value. The f inancial report is presented in Australian dollars. The f inancial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The amounts contained in this report and in the financial report have been rounded to the nearest $’000 (when rounding is applicable) under the option available to the Company under ASIC CO 98/0100. The Company is an entity to which the class order applies. Going Concern This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of l iabil ities in the normal course of business.
The Company and Consolidated Entity have achieved net losses after tax for the year ended 30 June 2009, mostly result ing from the impairment of the value of Spinifex Ridge long lead plant and equipment held for resale and finance costs expensed on the f inancing fac il ity held with various funds associated with the Trust Company of the West (“TCW”). These losses have been partially offset by the unrealised foreign currency gains on the $US150.000 mill ion (A$184.865 million) loan due to an increase in the US dollar exchange rate. The primary focus of the Consolidated Entity is the advancement of the Spinifex Ridge Molybdenum Project and the development of an Iron Ore project on the same mining leases. During the year ended 30 June 2009, the Consolidated Entity has incurred cash outflows of $3,150,070, $60,315,687 and $113,068,139 respectively on exploration and evaluation expenditure, mine property development costs and acquisit ion of plant and equipment, respectively. At balance date, the Company and Consolidated Entity had cash and cash equivalents of $64,011,688 and trade and other payables of $21,141,783. The Company also had a finance facili ty for US$150 million plus accrued interest maturing on 31 October 2009. Subsequent to year-end, the Company has negotiated an initial one-month extension to this facili ty whilst the Company undertakes a minimum US$25 million equity raising. This amount is to be retained by the Company to develop an Iron Ore project, and for working capital and general corporate purposes. This is the key Condit ion Precedent to allow a full restructure of the facility . The terms of the proposed restructure inc lude, the repayment of excess funds in the Company, estimated at US$43 million, US$40 million of debt repayable in eighteen months from the proceeds of sale of excess assets, US$83 million ( less any equity raised over US$25 million) repayable in two years and US$20 million repayable over five years from cash f lows associated with a proposed Iron Ore project development at Spinifex Ridge. In September 2009, the Company appointed a syndicate offering securities on a best efforts basis subject to agreement on price and size of the offering. The Company has commenced marketing the offer through a book-build process with the syndicate and has received expressions of interest in relation to acquiring the subscription receipts (each subscription receipt convertible to a share in Moly Mines Limited subject to shareholder approval) in excess of the minimum requirement for the restructure of the TCW facil ity. In addition, the Company continues to pursue potential strategic partners for the Spinifex Ridge projects with a view to these partner or partners assisting with project funding There are no guarantees that these discussions will result in a transaction. Taking into account these matters, the Directors are of the opinion that the use of the going concern basis of accounting is appropriate. However, should adequate funding not be available the Company and Consolidated Entity may be required to
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47
dispose of assets and extinguish liabilit ies outs ide the ordinary course of business. The financial report does not include any adjustments to the amounts and classif ication of recorded assets and the classif ication of recorded l iabili ties that may be necessary if the Company and Consolidated Entity are unable to continue as a going concern. New Accounting Standards and Interpretations From 1 July 2008, the Consolidated Entity has adopted the following Standards and Interpretations, mandatory for annual periods beginning on or after 1 July 2008. • AASB 2008-10 Amendment to Australian Accounting Standards – Reclassification of Financial Assets (amendments to
AASB 139 Financial Instruments: Recognit ion and Measurement and AASB 7 Financial Instruments Disclosures). • Interpretation 4 (revised) Determining whether an arrangement contains a lease. Adoption of these standards and interpretations did not have any effect on the financial position or performance of the Consolidated Entity. Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2009. These are outl ined in the table below.
Reference Tit le Impact on Group f inancial report Application date of standard
Application date for Group
AASB 8 and AASB 2007-3 (IFRS 8)
Operating Segments and consequential amendments to other Australian Accounting Standards
New Standard replacing AASB 114 Segment Reporting (IAS 14), which adopts a management reporting approach to segment reporting.
1 January 2009
1 July 2009
AASB 123 (Revised) and AASB 2007-6 (IAS 23 (Revised))
Borrowing Costs and consequential amendments to other Australian Accounting Standards
The amendments to AASB 123 (IAS 23) require that all borrowing costs associated with a qualifying asset be capitalised.
1 January 2009
1 July 2009
AASB 101 (Revised), AASB 2007-8 and AASB 2007-10 (IAS 1 (Revised))
Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards
Introduces a statement of comprehensive income.
Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the f inancial statements, changes in the presentation requirements for div idends and changes to the tit les of the f inancial statements.
1 January 2009
1 July 2009
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Reference Tit le Impact on Group f inancial report Application date of standard
Application date for Group
AASB 2008-1 (IFRS 2)
Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations
The amendments clarify the definit ion of “vesting condit ions”, introducing the term “non-vesting condit ions” for condit ions other than vesting condit ions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied.
1 January 2009
1 July 2009
AASB 3 (Revised) (IFRS 3 (Revised))
Business Combinations The revised Standard introduces a number of changes to the accounting for business combinations, the most signif icant of which includes the requirement to have to expense transaction costs and a choice (for each business combination entered into) to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice wil l effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognis ing goodwill relating to the percentage interest acquired. The changes apply prospectively.
1 July 2009 1 July 2009
AASB 2008-3 (IFRS 3 (Revised), IAS 27 (Revised))
Amendments to Australian Accounting Standards aris ing from AASB 3 (revised) and AASB 127 (revised) (IFRS 3 (revised) and IAS 27 (revised))
Amending Standard issued as a consequence of revisions to AASB 3 (revised) (IFRS 3 (rev ised)) and AASB 127 (revised) (IAS 27 (revised)). Refer above.
1 July 2009 1 July 2009
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Reference Tit le Impact on Group f inancial report Application date of standard
Application date for Group
AASB 2008-5 (IAS Annual Improvements Project)
Amendments to Australian Accounting Standards aris ing from the Annual Improvements Project
The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes wil l have minimal impact.
This was the firs t omnibus of amendments issued by the IASB arising from the Annual Improvements Project and it is expected that going forward, such improvements will be issued annually to remove inconsistencies and clarify wording in the standards.
The AASB issued these amendments in two separate amending standards; one dealing with the accounting changes effective from 1 January 2009 and the other dealing with amendments to AASB 5 (IFRS 5), which wil l be applicable from 1 July 2009 [refer below AASB 2008-6].
1 January 2009
1 July 2009
AASB 2008-6 (IAS Annual Improvements Project)
Further Amendments to Australian Accounting Standards aris ing from the Annual Improvements Project
This was the second omnibus of amendments issued by the IASB arising from the Annual Improvements Project.
Refer to AASB 2008-5 above for more details.
1 July 2009 1 July 2009
AASB 2008-7 (IAS 27)
Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
The main amendments of relevance to Australian entities are those made to AASB 127 (IAS 27) deleting the “cost method” and requir ing all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity 's separate financial statements ( i.e., parent company accounts). The distinction between pre- and post-acquisit ion profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment.
AASB 127 (IAS 27) has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value.
1 January 2009
1 July 2009
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Reference Tit le Impact on Group f inancial report Application date of standard
Application date for Group
AASB 2009-2 (IFRS 7)
Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038]
(IFRS 4 and IFRS 7)
The main amendment to AASB 7 (IFRS 7) requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy:
quoted prices (unadjusted) in active markets for identical assets or l iabili ties (Level 1);
• inputs other than quoted prices included in Level 1 that are observable for the asset or liability , either directly (as prices) or indirectly (derived from prices) (Level 2); and
• inputs for the asset or l iabili ty that are not based on observable market data (unobservable inputs) (Level 3).
These amendments arise from the issuance of Improving Disclosures about Financial Instruments (Amendments to IFRS 7) by the IASB in March 2009.
The amendments to AASB 4 (IFRS 4), AASB 1023 and AASB 1038 comprise editorial changes resulting from the amendments to AASB 7 (IFRS 7).
Annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009.
1 July 2009
AASB 2009-4 (IAS Annual Improvements Project)
Amendments to Australian Accounting Standards aris ing from the Annual Improvements Project
[AASB 2 and AASB 138 and AASB Interpretations 9 & 16]
(IFRS 2, IAS 38, IFRIC 9 and IFRIC 16)
The amendments to some Standards result in accounting changes for presentation, recognit ion or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.
The main amendment of relevance to Australian entities is that made to IFRIC 16 which allows qualifying hedge instruments to be held by any entity or entit ies within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements in AASB 139 (IAS 39) that relate to a net investment hedge are satisf ied. More hedging relationships will be eligible for hedge accounting as a result of the amendment.
These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The amendments pertaining to IFRS 5, 8, IAS 1,7, 17, 36 and 39 have been issued in Australia as AASB 2009-5 (refer below).
1 July 2009 1 July 2009
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Reference Tit le Impact on Group f inancial report Application date of standard
Application date for Group
AASB 2009-5 (IAS Annual Improvements Project)
Further Amendments to Australian Accounting Standards aris ing from the Annual Improvements Project
[AASB 5, 8, 101, 107, 117, 118, 136 & 139]
(IFRS 5, 8, IAS 1, 7, 17, 18, 36 and 39)
The amendments to some Standards result in accounting changes for presentation, recognit ion or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.
The main amendment of relevance to Australian entities is that made to AASB 117 (IAS 17) by removing the specific guidance on classifying land as a lease so that only the general guidance remains. Assessing land leases based on the general cr iteria may result in more land leases being c lassified as finance leases and if so, the type of asset which is to be recorded (intangible v property, plant and equipment) needs to be determined.
These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The AASB has issued the amendments to IFRS 2, IAS 38, IFRIC 9 as AASB 2009-4 (refer above).
1 January 2010
1 July 2010
AASB 2009-7 (IAS Editorial amendments)
Amendments to Australian Accounting Standards
(AASB 5, 7, 107, 112, 136 & 139 and Interpretation 17)
(IFRS 5, 7, IAS 7, 12, 36 and 39, IFRIC 17)
These comprise editorial amendments and are expected to have no major impact on the requirements of the amended pronouncements
1 July 2009 1 July 2009
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Reference Tit le Impact on Group f inancial report Application
date of standard
Application date for Group
Amendments to International Financial Reporting Standards
(IFRS 2)
Amendments to AASB 2
(IFRS 2)
The amendments clarify the accounting for group cash-sett led share-based payment transactions, in part icular: • the scope of AASB 2; and • the interaction between IFRS 2 (IFRS 2) and other standards.
An entity that receives goods or serv ices in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash.
A “group” has the same meaning as in IAS 27 Consolidated and Separate Financial Statements, that is, it includes only a parent and its subsidiaries.
The amendments also incorporate guidance previously included in IFRIC 8 Scope of IFRS 2 and IFRIC 11 IFRS 2—Group and Treasury Share Transactions. As a result, IFRIC 8 and IFRIC 11 have been withdrawn.
1 January 2010
1 July 2010
The impact of the adoption of these new and rev ised standards and interpretations has not been determined by the Group. Compliance with IFRS The f inancial report complies with Australian Accounting Standards and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Basis of Consolidation The consolidated f inancial statements are those of the consolidated entity comprising Moly Mines Limited (“Moly Mines” or the “Company”) (the parent entity) and all entities that Moly Mines controlled at the reporting date (the “Group”). Subsidiaries are fully consolidated from the date the parent entity obtains control until such t ime as control ceases. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent entity has control. Subsidiary acquisit ions are accounted for using the purchase method of accounting. The f inancial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intra group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Moly Mines has nominal investments in subsidiaries as detailed in Note 24. F
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Significant accounting judgments, estimates and assumptions (i) Significant accounting judgements In the process of applying the Group's accounting polic ies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the f inancial statements: (a) Determination of mineral resources and ore reserves The determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates, deferred stripping costs and provisions for decommissioning and restoration. Moly Mines estimates its mineral resources and ore reserves in accordance with the Group Policy for the Reporting of Mineral Resources and Ore Reserves. This policy requires that the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 (the 'JORC code') be used as a minimum standard. The information on mineral resources and ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the t ime of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodit ies, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ult imately, result in the reserves being restated. (ii) Significant accounting estimates and assumptions The carry ing amounts of certain assets and l iabili ties are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a signif icant risk of causing a material adjustment to the carrying amounts of certain assets and liabilit ies within the next annual reporting period are: (a) Impairment of capitalised exploration and evaluation expenditure The future recoverabil ity of capitalised exploration and evaluation expenditure is dependent on a number of factors, inc luding whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverabili ty inc lude the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (inc luding changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets wil l be reduced in the period in which this determination is made. In addit ion, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the exis tence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made. (b) Impairment of capitalised mine property development expenditure The future recoverabili ty of capitalised mine property development expenditure is dependent on a number of factors, inc luding the level of proved, probable and inferred mineral resources, future technological changes that could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised mine property development expenditure is determined not to be recoverable in the future profits and net assets wil l be reduced in the period in which this determination is made. Key assumptions used to determine impairment are disclosed in Note 13. (c) Impairment of plant and equipment Plant and equipment is reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use'
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(being the net present value of expected future cash f lows of the relevant cash generating unit) and ‘ fair value less costs to sell '. In determining value in use, future cash flows are based on: • estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of
economic extraction; • future production levels; • future commodity prices; and • future cash costs of production. Variations to the expected future cash flows, and the t iming thereof, could result in signif icant changes to any impairment losses recognised, if any, which could in turn impact future financial results. Key assumptions used to determine impairment are disclosed in Note 13. (d) Provis ions for decommissioning and restoration costs Decommissioning and restoration costs are a normal consequence of mining, and the majority of this expenditure is incurred at the end of a mine's l ife. In determining an appropriate level of provision consideration is given to the expected future costs to be incurred, the t iming of these expected future costs ( largely dependent on the life of the mine), and the estimated future level of inf lation. The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates. Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future f inancial results .
(e) Share-based payment transactions The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer us ing the Black-Scholes model using the assumptions disclosed in Note 27. The fair value is disclosed in Note 18 under share based payment reserves. The accounting estimates and assumptions relation to equity sett led share-based payments used would have no impact on the changing amount of assets and liabilit ies within the next reporting period but may impact expenses and equity . Foreign Currency Translation (i) Functional and presentation currency Both the functional and presentation currency of Moly Mines and its Australian subsidiaries is Australian dollars ($). Each entity in the Group determines its own functional currency and items inc luded in the financial statements of each entity are measured using that functional currency. (ii) Transactions and balances Transactions in foreign currencies are init ially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabil it ies denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to profit and loss. Borrowing costs Borrowing costs are recognised as an expense when incurred, unless related to qualifying assets in which case, they are capitalised. During the year ended 30 June 2009 the borrowing costs incurred on the f inancing fac il ity provided by various funds associated with the Trust Company of the West were amortised over the l ife of the loan. The capitalisation rate applied is 32.4% per annum.
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Cash and cash equivalents Cash and short term deposits in the balance sheet comprise of cash at bank and in hand and short term deposits with an original maturity of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignif icant risk of changes in value. For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks, as defined above (and money market investments readily convertible to cash on hand) net of outstanding bank overdrafts. Trade and other receivables Trade receivables, which generally have 30 to 90 day terms, are recognised and carried at original invoice amount less an allowance for impairment. Collectabili ty of trade receivables is rev iewed on an ongoing basis at an operating unit level Individual debts that are known to be uncollectible are written off when identified. An impairment allowance is recognised when there is objective ev idence that the Group will not be able to collect the receivable. Financial difficult ies of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carry ing amount compared to the present value of estimated future cash f lows, discounted at the original effective interest rate. Non-current assets and disposal groups held for sale and discontinued operations Non-current assets and disposal groups are c lassified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered princ ipally through a sale transaction. They are not depreciated or amortised. For an asset or disposal group to be classified as held for sale it must be available for immediate sale in its present condition and its sale must be highly probable. An impairment loss is recognised for any init ial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognit ion. Investment in associate The Group’s investment in its associate is accounted for us ing the equity method of accounting in the consolidated financial statements. The associate is an entity over which the Group has significant inf luence and is neither a subsidiary nor joint venture. The Group generally deems they have signif icant inf luence if they have over 20% of the voting rights. Under the equity method, the investment in the associate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group’s net investment in the associate. The Group’s share of its associate’s post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisit ion movements in reserves is recognised in reserves. The cumulative post-acquisit ion movements are adjusted against the carrying amount of the investment. Div idends receivable from associates are recognised in the parent entity’s income statement, while in the consolidated financial statements they reduce the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The most recent available f inancial statements of the associate are used by the Group in apply ing the equity method.
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Plant and Equipment Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. The cost of each item of plant and equipment is written off over its expected economic l ife, adjusted for any salvage value if applicable. Estimates of remaining useful l ives are made on a regular basis for all assets, with annual reassessments for major items. Depreciation is provided on a straight-l ine basis on all plant and equipment. Major depreciation periods are:
2009 2008
Plant and equipment 2-4 years 2-4 years
Motor vehic les 5 years 5 years Disposal An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognit ion of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Impairment Plant and equipment is reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use' (being the net present value of expected future cash f lows of the relevant cash generating unit) and ‘fair value less costs to sell '. Leases Leases are classified at their inception as either operating leases or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Leases that effectively transfer all r isks and benefits incidental to ownership of the leased property are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liabil ity of equal value is also recognised. Capitalised leased assets are depreciated over the shorter of the estimated useful li fe of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liabil ity with the interest expense calculated using the interest rate implicit in the lease and recognised directly in the income statement. Operating lease payments are recognised as an expense in the income statement on a straight l ine basis over the lease term. Lease incentives are recognised as liability when received and subsequently reduced by allocating lease payments between rental expenses and reduction of the liabili ty. Exploration and evaluation expenditure Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. Such expenditure comprises net direct costs and an appropriate port ion of related overhead expenditure, but does not include general overheads or administrative expenditure not having a specif ic nexus with a part icular area of interest. Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a mining operation. Exploration expenditure for each area of interest is written off as incurred, except that it may be carried forward provided that one of the following conditions is met: • such costs are expected to be recouped through successful development and exploitation of the area of interest or,
alternatively, by its sale; or • exploration activ ities in the area of interest have not, at balance date reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves.
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Exploration expenditure which no longer satisf ies the above policy is written off. In addit ion, a provision is raised against exploration expenditure where the Directors are of the opinion that the carr ied forward net cost may not be recoverable under the above policy. The increase in the provision is charged against the income statement for the year. When an area of interest is abandoned, any expenditure carried forward in respect of that area is written off in the year in which the decision to abandon is made, firstly against any existing provision for that expenditure, with any remaining balance being charged to the income statement for the year. Expenditure is not carried forward in respect of any area of interest unless the Group’s r ight of tenure to that area of interest is current. Amortisation is not charged on areas under development, pending commencement of production. Exploration and evaluation expenditure wil l commence to amortise by using unit-of-production method after the individual geological area commences production. Impairment The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash generating unit level whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. An impairment exis ts when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in the income statement. Mine property development expenditure Mine property development expenditure represents the costs incurred in preparing mines for production and inc ludes stripping and waste removal costs incurred before production commences. These costs are capital ised to the extent they are expected to be recouped through successful exploitation of the related mining leases. Once production commences, these costs are amortised using the units-of-production method based on the estimated economically recoverable reserves to which they relate or are written off if the mine property is abandoned. Mine property development expenditure wil l commence to depreciate by using unit-of-production method after the individual geological area commences production. The definition of an area of interest is the individual geological area where the presence of an ore f ield exists. Impairment The carrying value of capitalised mine property development expenditure is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount of capitalised mine property development expenditure is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash f lows 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 specif ic to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value. An impairment exis ts when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in profit or loss. Provis ion for restoration, rehabilitation and environmental expenditure The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Furthermore, gains from the expected disposal of assets are not taken into account in measuring a provision. Any adjustments to the provision as a result of the unwinding of the discount are recognised as an interest expense and not as a movement in the restoration provis ion expense.
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Changes to the estimated l iabil ity, including changes as a result of changes to discount rates are added to or subtracted from the cost of the asset in the current period. The carry ing value of the asset may not, however, be reduced below zero, hence any excess is taken immediately to the income statement. As at 30 June 2009, the Group’s restorative and rehabilitation commitments were immaterial due to activ ities to date not having had a significant effect on the tenements being explored and developed. Trade and other payables Trade payables and other payables are carried at amortised costs and represent l iabili ties for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Interest-bearing liabili ties All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost us ing the effect interest method. Gains and losses are recognised in profit and loss when the liabil it ies are derecognised. Provis ions Provis ions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to sett le the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is v irtually certain. The expense relating to any provis ion is presented in the income statement net of any reimbursement. Provis ions are measured at the present value of management’s best estimate of the expenditure required to sett le the present obligation at the balance sheet date. The risks specific to the provision are factored into the cash f lows and as such a r isk-free government bond rate relative to the expected l ife of the provision is used as a discount rate. The increase in the provisions resulting from the passage of time is recognised in finance costs. Employee entitlements Provis ion is made for employee entitlements accumulated as a result of employees rendering services up to the reporting date. These entit lements include wages and salaries, annual leave and long service leave. Liabil it ies arising in respect of wages and salaries, annual leave and any other employee benefits expected to be sett led within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the l iabili ty is sett led. All other employee benefit l iabili ties are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outf lows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related l iabil ities, are used. Share-based payment transactions The Company provides benefits to employees (including Directors) of the Company in the form of share-based payment transactions whereby employees render services in exchange for shares or r ights over shares (“share based payments” or “equity settled transactions”). There is currently an Employee Incentive Option Scheme in place to provide these benefits to employees. The cost of these equity sett led transaction with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer us ing a Black-Scholes model, details of which are given in note 27.
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The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions and/or service conditions are fulfil led, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense recognized for equity-sett led transactions at each reporting date unti l vesting date reflects (i) the extent to which the vesting period has expired and ( ii) the number of awards that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the l ikelihood of market conditions being met as the effect of these conditions is inc luded in the determination of fair value at grant date. The income statement charge or credit for the period represents the movement in the cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condit ion. Where the terms of an equity-sett led award are modif ied, as a minimum an expense is recognised as if the terms had not been modified. In addit ion, an expense is recognised for any increase in the total fair value of the transaction as a result of the modification, as measured at the date of modif ication. Where an equity-sett led award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilut ive effect, if any, of the outstanding options is reflected as additional share dilution in the computation of earnings/loss per share (see note 20) Contributed equity Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs aris ing on the issue of ordinary shares are recognised directly in equity as a reduction net of tax of the share proceeds received. Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will f low to the Group and the revenue can be reliably measured. The following specific recognit ion criteria must also be met before revenue is recognised: Sale of Goods Revenue is recognised when the s ignificant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the t ime of delivery of the goods to the customer. Interest Revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a f inancial asset 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 f inancial asset.
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Taxes (i) Income Tax Current tax assets and liabilit ies for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or 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 liabil it ies and their carrying amounts for f inancial reporting purposes. Deferred income tax l iabil it ies are recognised for all taxable temporary differences: • except when the deferred income tax l iabili ty arises from the initial recognition of goodwill or of an asset or liabil ity in a
transaction that is not a business combination and that, 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 difference 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 wil l be available against which the deductible temporary differences and the carry forward of unused tax credits and tax losses can be uti lised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the init ial recognit ion 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 loss, or
• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit wil l be available against which the temporary difference can be util ised.
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 uti lised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit wil l al low the deferred tax asset to be recovered. Deferred income tax assets and l iabil ities are measured at the tax rates that are expected to apply to the year when the asset is realised or the l iabili ty is sett led, 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 profit or loss. Deferred tax assets and deferred tax l iabil ities are offset only if a legally enforceable right ex ists to set off current tax assets against current tax l iabil ities and the deferred tax assets and l iabili ties relate to the same taxable entity and the same taxation authority. Tax consolidation legis lation Moly Mines and its wholly-owned Australian controlled entit ies implemented the tax consolidation legislation as of 25 March 2004. The head entity , Moly Mines Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. In addit ion to its own current and deferred tax amounts, the Company also recognises the current tax liabilit ies (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
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Assets or l iabil it ies arising under tax funding agreements with the tax consolidated entit ies are recognised as amounts receivable from or payable to other entities in the Group. Details of the tax funding agreement are disclosed in note 4. Any differences between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as contr ibution to (or distribution from) wholly-owned tax consolidated entit ies. (ii) Other Taxes Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable, and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows aris ing from investing and f inancing activit ies, which is recoverable from, or payable to, the taxation authority are classified as operating cash f lows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Earnings per Share (i) Basic Earnings per Share Basic earnings per share is determined by dividing the profit / (loss) from ordinary activit ies after related income tax expense by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus element. (ii) Diluted Earnings per Share Diluted EPS is calculated as net profit / ( loss) attributable to members, adjusted for: • Costs of servicing equity (other than dividends); • The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised
as expenses; and • Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Government grants Government grants are recognised in the balance sheet as a liabil ity when the grant is received. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. They are not credited directly to shareholders' equity. When the grant relates to an asset, the fair value is credited to deferred income and is released to the income statement over the expected useful l ife of the relevant asset by equal annual instalments. Rounding The amounts contained in this report and in the financial report have been rounded to the nearest $’000 (when rounding is applicable) under the option available to the Company under ASIC CO 98/0100. The Company is an entity to which the class order applies.
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Comparatives Certain comparatives have been reclassified in the current year to be presented on a consistent basis with the current year presentation. Specif ically, the Cortona Resources Limited options previously inc luded with the equity accounted investment in associate have been reclassif ied to held for trading financial assets to more appropriately reflect the nature and classif ication of the investment.
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Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000
3. R E V E NU E A ND E X P E NS E S Revenue Interest revenue 835 3,551 567 3,551
Other Income Gain on disposal of plant & equipment - 7 - 7
Net gain on disposal of Big Is land Mining Limited (note 7) - 7,134 - 6,924
Government grants - 75 - 75
Rental Income 38 - 38 -
38 7,216 38 7,006
Administrative Expenses Salaries and wages 1,211 365 1,211 365
Directors ' fees 294 107 294 107
Share-based payment expense 327 288 327 288
Operating lease 134 220 134 220
Travel expenses 80 249 80 249
ASX/TSX fees 99 69 99 69
Consultant fees 485 503 485 503
Depreciation and amortisation 66 60 66 60
Auditor fees - Audit 170 96 170 96
Tax compliance 107 28 107 28
Legal fees 405 57 405 57
Fringe benefits tax 60 33 60 33
Recruitment fees 3 77 3 77
Advertis ing expenses 4 33 4 33
Office supplies 8 53 8 53
Conference fees 15 55 15 55
Other expenses 876 267 816 267
4,344 2,560 4,284 2,560
Administration expenses included
Salaries, wages and other employee benefits 1,538 653 1,538 653
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Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000 Finance costs TCW loan 23,634 - - -
Other 614 14 614 14
Charged to the income statement 24,248 14 614 14
Amounts capitalised to mine property development (Note 13) 8,167 1,141 - -
Amount capitalised to plant & equipment (Note 11) 11,598 - - -
44,013 1,155 614 14
4. INC O ME T A X The major components of income are:
Income Statement
Current Income Tax
Current income tax (charge) / benefit - - - -
Deferred Income Tax Relating to origination and reversal of timing differences (1,930) - (1,930) -
(1,930) - (1,930 -
Amounts Charged Or Credited Directly To Equity
TCW Loan -Fair value of warrants issued 1,930 - 1,930 -
A reconcil iation between income tax expense and the product of accounting profit before income tax mult iplied by the Group’s applicable income tax rate is as follows: Accounting loss before income tax (50,109) 4,265 (50,111) 4,055
At the Group’s statutory income tax rate of 30% (15,052) 1,280 (15,033) 1,217
Tax effect of permanent differences:
Corporate Reconstruction Costs - - - -
Meal Entertainment 10 11 10 11
Share Based Payments 90 86 90 86
Loss from associate 52 37 52 37
Section 40-880 Costs - - - -
Other - - - - Unrecognised tax losses / (benefit from previously unrecognised tax assets) 12,950 (1,414) 12,951 (1,351)
Income tax (benefit) /expense (1,930) - (1,930) -
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65
CONSOLIDATED
Opening Balance
A$’000
Charged to Income A$’000
Charged to Equity
A$’000
Closing Balance
A$’000
2009 Deferred tax balances Taxable and deductible temporary differences arise from the following: Deferred tax assets
Provis ions 157 (42) - 114
Section 40-880 Costs 1,549 (525) - 1,024
Investment in associate 1,074 210 - 1,284
Foreign exchange on cash - 4,101 - 4,101
Assets held for sale - 6,282 - 6,282
Plant and equipment - 65 65
Security deposits - 300 300
Receivables - 14 14
Payables - 3 3
Losses available for offset against future taxable income 13,660 5,682 - 19,342
16,440 16,090 - 32,529
Offset against deferred tax liabilit ies (13,273) (4,158) - (17,431)
Unrecognised deferred tax asset (3,167) (10,002) - (13,168)
- 1,930 - 1,930
Deferred tax l iabil it ies
Prepayments (43) (85) - (128)
Exploration (13,090) (1,276) - (14,366)
Mine property development - (2,457) - (2,457)
Accrued Interest (140) 131 - (9)
TCW loan - (471) (1,930) (2,401)
(13,273) (4,158) (1,930) (19,361)
Offset against deferred tax assets 13,273 4,158 - 17,431
- - (1,930) (1,930)
Net deferred tax balance - 1,930 (1,930) -
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CONSOLIDATED
Opening Balance
A$’000
Charged to income A$’000
Charged to Equity
A$’000
Closing Balance
A$’000
2008 Deferred tax balances Taxable and deductible temporary differences arise from the following:
Deferred tax assets Provis ions 80 77 - 157
Section 40-880 Costs 322 (519) 1,746 1,549
Investment in associate - 1,074 - 1,074
Capital Gain on sale of Big Island 2,119 (2,119) - -
Losses available for offset against future taxable income 13,660 5,682 - 19,342
15,919 (1,225) 1,746 16,440
Offset against deferred tax liabilit ies (14,550) 1,278 - (13,272)
Unrecognised deferred tax asset (1,369) (53) (1,746) (3,168)
- - - -
Deferred tax l iabil it ies
Prepayments (13) (30) - (43)
Exploration (14,492) 1,403 - (13,089)
Accrued Interest (45) (95) - (140)
(14,550) 1,278 - (13,272)
Offset against deferred tax assets 14,550 (1,278) - 13,272
- - - -
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67
PARENT
Opening Balance
A$’000
Charged to income A$’000
Charged to Equity
A$’000
Closing Balance
A$’000
2009
Deferred tax balances Taxable and deductible temporary differences arise from the following:
Deferred tax assets Provis ions 157 (42) - 115
Section 40-880 Costs 1,549 (525) - 1,024
Investment in associate 1,074 210 - 1,284
Losses available for offset against future taxable income 13,660 4,292 - 17,952
16,440 3,935 - 20,374
Offset against deferred tax liabilit ies (360) 21 - (339)
Unrecognised deferred tax assets (16,080) (2,026) - (18,106)
- 1,930 - 1,930
Deferred tax l iabil it ies Prepayments (43) (85) - (128)
Exploration (177) (33) - (210)
Accrued Interest (140) 139 - (1)
TCW loan - - (1,930) (1,930)
(360) 21 (1,930) (2,269)
Offset against deferred tax assets 360 (21) - 339
- - (1,930) (1,930)
Net deferred tax balance - 1,930 (1,930) -
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68
PARENT
Opening Balance
A$’000
Charged to income A$’000
Charged to Equity
A$’000
Closing Balance
A$’000
2008 Deferred tax balances Taxable and deductible temporary differences arise from the following:
Deferred tax assets Provis ions 80 77 - 157
Section 40-880 Costs 322 (519) 1,746 1,549
Investment in associate - 1,074 - 1,074
Capital Gain on sale of Big Island 2,119 (2,119) - -
Losses available for offset against future taxable income (AUS) 13,398 262 - 13,660
15,919 (1,225) 1,746 16,440
Offset against deferred tax liabilit ies (58) (302) -
(360)
Unrecognised deferred tax assets (15,861) 1,527 (1,746) (16,080)
- - - -
Deferred tax l iabil it ies
Prepayments (13) (30) - (43)
Exploration - (177) - (177)
Accrued Interest (45) (95) - (140)
(58) (302) - (360)
Offset against deferred tax assets 58 302 -
360
- - - -
Consolidated Parent
30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$’000
Unrecognised deferred tax asset
Total tax losses available 17,952 13,660 17,952 13,660
Net (taxable) / deductible temporary differences (9,095) (10,492) 6,369 2,420
Unrecognised deferred tax asset, (net) 8,857 3,168 24,321 16,080
The deferred tax assets will only be obtained if: i) future assessable income is derived of a nature and of an amount suff icient to enable the benefit to be realised; ii) the condit ions for deductibil ity imposed by tax legislation continue to be complied with, and iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
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Tax consolidation ( i) Members of the tax consolidated group and the tax sharing arrangement Moly Mines and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 25 March 2004. Moly Mines is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax l iabilit ies between the entit ies should the head entity default on its tax payment obligations. No amounts have been recognised in the f inancial statement in respect of this agreement on the basis that the possibili ty of default is remote. ( ii) Tax effect accounting by members of the tax consolidated group Measurement method adopted under UIG 1052 Tax Consolidated Accounting The head entity and the controlled entit ies in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. In addit ion to its own current and deferred tax amounts, the head entity also recognises current tax liabil it ies (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Nature of the tax funding agreement Members of the tax consolidated group have entered into a tax funding agreement. As no current tax assets or l iabil ities or deferred tax assets in relation to tax losses or unused tax credits have been recognised, there have been no adjustments required under UIG 1052 Tax Consolidation Accounting. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount charged under the tax funding agreement and the allocation under UIG 1052, the head entity accounts for these as equity transactions with the subsidiaries. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each f inancial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax installments. Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$’000 5. C A S H A ND C A S H E Q U IV A L E NT S Cash at bank and in hand 64,012 277 34 277 Money market investments - 48,316 - 48,316
64,012 48,593 34 48,593
Bank bills and other money market investments are typically held for 30 to 90 days and earn interest at the prevail ing rates. Cash at bank is kept to a minimum and typically attracts a lower interest rate than short term investments. The Group obtains assistance from an independent financial r isk management f irm to assist with the investment of its bank bills and other money market investments. The Group has an investment policy that is strict ly adhered to by the f irm when providing guidance on money market investments to purchase. The Group does not have any exposure to asset-backed commercial paper.
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Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$’000
6. O T H E R R E C E IV A B L E S Current Security deposits (a)(i) 209 319 209 319 GST receivables (a)( ii) 288 1,985 288 1,985 Other receivables (a)( ii) 80 97 80 97 Interest receivable (a)( ii) 42 466 16 466 Prepayments 427 143 427 143
1,046 3,010 1,020 3,010 Non-current Loans to wholly-owned subsidiaries (a)(i ii) - - 157,947 133,896 Security deposits 2,005 362 284 362 Allowance for impairment loss (b) - - (44,901) -
2,005 362 113,330 134,258
(a) Terms and condit ions
Terms and conditions relating to the above f inancial instruments
(i) Security deposits are interest bearing with interest maturing between 30 and 90 days. They are applied as a security for government bonds on Company tenements. Due to the short- term nature of these deposits, their carrying value approximates their fair value.
(ii) These receivables and prepayments are non-interest bearing and generally on 30 day terms. Due to the short-term return, their carrying value approximates their fair value.
(ii i) Loans to wholly-owned subsidiaries are non-interest bearing and have no f ixed repayment term. The loans are repayable on demand however, Moly Mines, for the foreseeable future, continues to provide financial support and has no intention of demanding repayment unti l the subsidiary has the capacity to repay. For terms and condit ions of related party receivables, refer to note 24.
(b) Impaired or past due f inancial assets An allowance for impairment is recognised when there is objective evidence that an individual trade receivable is impaired. At 30 June 2009, an impairment loss has not been recognised by the Consolidated Entity and an impairment loss of $44,900,994 (2008: Nil) was recognised by the Company against a loan to a wholly owned subsidiary in the current year.
Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.
(c) Credit r isk The carry ing value of the receivables approximates their fair value. The maximum exposure of credit r isk at the reporting date is the higher of the carry ing value and fair value of each class of receivables. No collateral is held as security.
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71
7 S A L E O F B IG IS L A ND MINING L IMIT E D In February 2007, the Company entered into a binding term sheet with Cortona Resources Limited (“Cortona”) for the sale of all the shares in its 100% owned subsidiary Big Island Mining Limited (“Big Island”), which holds the Company’s interests in its New South Wales Gold Assets. The sale was for:
• $5 million cash; • 12 million fully paid ordinary shares in Cortona; • 8 mill ion options in Cortona exercisable at $0.35, expiring 2 years from the date of issue; and • a further 8 mill ion options, exerc isable at $0.50 (Royalty Options).
The Royalty Options do not vest unti l either the successful delineation of a total of 1 mil lion ounces of measured and / or indicated resource ( in accordance with the requirements of the JORC code) from the New South Wales Gold Assets or a decis ion to mine is made on any of the New South Wales Gold Assets. In addition, on achievement of either of these royalty milestones, Moly Mines will receive a $4 million cash payment.
During the 2009 year, Cortona continued its gold exploration of its Western Australian and New South Wales tenements with positive results being achieved from its exploration programs. Whilst exploration results to date have been encouraging, they do not indicate that the contingent consideration wil l be received..
Cortona shareholders approved the acquisition of Big Island on 29 June 2007 and the transaction settled on 5 July 2007, on which date control of the business passed to the acquirer. Consideration received or receivable as at the disposal date, 5 July 2007:
A$’000
Cash 5,000
Share valuation 3,840
Option valuation 2,494
Total consideration 11,334
Carrying value of assets sold 4,145
Moly Mines security deposit written off 50
Disposal expenses 5
Profit on disposal of Big Island Mining Ltd 7,134
Net cash inflow on disposal
Cash 5,000
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72
Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000 8 . NO N C U R R E NT A S S E T S H E L D F O R S A L E Details of assets held for sale The Group has certain long-lead plant and equipment held for sale due to it being in excess to expected future development requirements. The non-current assets held for sale are as follows:
Plant and equipment 73,237 - - -
(a) The value of accommodation and camp infrastructure held for sale was impaired by $7,980,624 at 30 June 2009 based
on the sale contract price of US$12.1M (A$ 15,583,045) for the assets. 78% of the sale price was received on 22 July 2009. 10% was received on 11 August 2009 and the balance is expected to be paid by 30 September 2009.
(b) The value of other plant and equipment was impaired by $30,935,376 down to a value of $57,654,141. The value of the impairment was determined after consideration of proposals obtained for the orderly realisation of the sale of the excess plant and equipment. This indicated that the realisation potential for the sale of the equipment was in the range of 75 – 95% of the cost price. The Company has taken a conservative approach and impaired 30% of the original cost.
Minasco Australia Pty Ltd has been appointed to sell this plant and equipment. Promotion of the sale commenced on 1 September 2009 and it is expect that it wil l take six months to sell.
The major items of plant and equipment held for sale include: • 4000 TPH Thyssen Krupp semi-mobile primary gyratory crusher • 5.3MW / 2500TPH Polysius high pressure grinding rolls (2) • 14 MW Polysius 7.3 x 12.5M ball mil ls (2) • 1800-2450TPH Metso-Nordberg MP 1000 cone crusher (2) • Metso low head diverging v ibratory feeder (2) • Metso double deck multiflow screens (2)
9. INV E S T M E NT IN A S S O C IA T E (a) Investment details
Listed – Cortona Resources Limited 1,980 2,100 1,980 2,100
(b) Movements in the carrying amount of the Group’s investment in associate
At 1 July 2,100 - 2,100 -
Addit ions – Shares - 3,840 - 3,840 Reversal of impairment loss / (impairment loss) 54 (1,620) (120) (1,740)
Share of losses after income tax (174) (120) - -
1,980 2,100 1,980 2,100
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This impairment was the result of the reduction in the share price of Cortona. The recoverable amount has been determined using fair value less cost to sell with reference to share price. The Company accounts for Cortona using the equity method as it has significant inf luence due to the following: • Representation on the board of Cortona with one of the four Directors being a Director of the Company. • The Company holds a 11.8% shareholding in Cortona and at June 30, 2009 on a fully diluted basis at 30 June 2009 held a
22% interest due to a further 16,000,000 options being held in Cortona. Details of the options are described in note 7. On 5 July 2009 8,000,000 options expired and the Company’s fully diluted interest reduced to 16.5%. The revaluation in the shareholding in Cortona from 13.2% to 11.8% did not result in a signif icant change in the group’s share of attr ibutable net assets.
(c) Fair value of investment in listed associate
The fair value of the Group’s investment in associate is $1,980,000 (2008: $2,100,000)
(d) Summarised financial information
The following table i llustrates summarised financial information relating to the Group’s associate:
30 June 30 June
2009 2008
A$’000 A$’000
Extract from the associate’s balance sheet:
Current assets 3,036 4,729
Non-current assets 19,387 17,308
22,423 22,036
Current liabil it ies (560) (556)
Net assets 21,863 21,480
Share of associate’s net assets 2,588 2,835
Extract from associate’s income statement:
Revenue 149 491
Net loss for the year (1,356) (1,177)
Contingent liabilit ies relating to the associate
Share of contingent l iabil ities incurred jointly with other investors - -
Share of associate’s loss accounted for us ing the equity method 174 123
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Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000
10. NO N-C U R R E NT A S S E T S – F INA NC IA L A S S E T S C L A S S IF IE D A S H E L D F O R T R A DING
Options – Australian unlis ted at fair value 72 531 72 531
Financial assets classif ied as held for trading consist of 16,000,000 (2008: 16,000,000) unlis ted options in Cortona Resources Limited. Details of the options are described in Note 7. On July 05, 2009 8,000,000 options expired. (a) Valuation assumptions The fair value of the unlisted options has been estimated using valuation techniques based on assumptions that are supported by observable market prices or rates. Management believes the estimated fair value result ing from the valuation techniques and recorded in the balance sheet and the related changes in fair value recorded in profit and loss are reasonable, and the most appropriate at the balance sheet date. A reconciliat ion of the movement during the year is as follows:
Opening Balance 531 2,494 531 2,494
Net valuation loss (459) (1,963) (459) (1,963)
Closing Balance 72 531 72 531
(b) Valuation sensitiv ity
Management has estimated that the potential effect of using possible alternatives as inputs to the valuation models as not being material.
11. P L A NT A ND E Q U IP ME NT
Plant and equipment
- at cost 1,077 1,013 1,077 1,013
- accumulated depreciation (754) (485) (754) (485)
323 528 323 528
Motor vehicles
- at cost 151 151 151 151
- accumulated depreciation (63) (33) (63) (33)
88 118 88 118
Capital work in progress 59,715 42,797 - -
Total plant and equipment 60,126 43,443 411 646
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Reconcil iation of the carry ing amounts of plant and equipment at the beginning and end of the current and previous f inancial years. Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000
Plant and Equipment
Carrying amount at beginning 528 319 528 319
Addit ions 108 489 108 489
Disposals (12) (5) (12) (5)
Depreciation expense (301) (275) (301) (275)
323 528 323 528
Motor Vehicles ( i)
Carrying amount at beginning 118 26 118 26
Addit ions - 116 - 116
Depreciation expense (30) (24) (30) (24)
88 118 88 118
Capital Work in Progress
Carrying amount at beginning 42,797 - -
Plant and equipment transferred from exploration and evaluation - 6,969 - -
Addit ions 123,104 35,828 - -
Finance costs capitalised 11,598
Transferred to held for sale (112,153) - - -
Impairment of capital in progress (i i) (5,631) - - -
59,715 42,797 - -
60,126 43,443 411 646
(i) Assets under lease of $75,654 (2008: $118,256) are included in motor vehic les and are pledged as security for the associated lease l iabil ities – refer to note 15.
(ii) Includes an impairment of $5.281 mill ion as a result of the termination or cessation of contracts and an impairment of $0.349 mill ion on capital work in progress costs incurred on the Spinifex Ridge Molybdenum Project.
(ii i) Includes finance costs of $11.598 million incurred on the debt financing fac il ity. Further details on the financing facili ty are set out in note 15 ( i).
(iv) Encumbrances are referred to at note 15 (i i) .
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Consolidated Parent
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000
12. E X P L O R A T IO N A ND E V A L U A T IO N Carrying amount at beginning of the year 641 43,807 641 470
Expenditure incurred 3,795 18,169 181 396
Plant and equipment transferred to capital work in progress - (6,969) - -
Expenditure written off (181) (225) (181) (225)
Expenditure transferred to mine property development - (54,141) - -
Expenditure transferred to subsidiary - - (641) -
Carrying amount at end of the year 4,255 641 - 641
The exploration expenditure written off noted above was written off in accordance with the Group policy described in note 2. During the year exploration expenditure of $123,264 (2008: $137,727) was incurred on tenement generation, this expenditure does not relate to an area of interest and was expensed as incurred. The total exploration expenditure written off for the year is $180,805 (2008: $225,458). The ult imate recoupment of costs carr ied forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining areas. The Consolidated Entity’s interest in mineral property tenements are as follows:
Spinifex Ridge Project – Moly Mines 100% The Spinifex Ridge Project consists of 4 Mining Licences, 6 Exploration Licences, 1 General Purpose Licence and a number of Miscellaneous Licences. The Project is located approximately 50 km northeast of the town of Marble Bar and 140 km east-southeast of the town of Port Hedland in the East Pilbara Shire of Western Australia. The r ights conferred by the tenements include the right to mine and sell all minerals and to carry on prospecting operations, except for uranium ore. The r ights to mine and prospect for iron ore has been specif ically authorised under Section 111 of the Mining Act 1978 for all mining licences. Glen Eden Project – Moly Mines 100% The Glen Eden Molybdenum Project consists of one exploration l icence and is located north east of Glen Innes in the New England Tablelands of New South Wales. The rights conferred by the licences include the r ight to mine and sell all metallic minerals. Mt Pleasant – Moly Mines 100% The Mt Pleasant Molybdenum Project consists of one exploration l icence and is located approximately 30 km south of Mudgee and 315 km northwest of Sydney. The rights conferred by the l icences inc lude the r ight to mine and sell all metallic minerals. Mt Tennyson – Moly Mines 100% The Mt Tennyson Molybdenum Project consists of one exploration licence and is located east of Bathurst in central NSW. The rights conferred by the l icences inc lude the right to mine and sell all metall ic minerals.
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Overseas Projects The Consolidated Entity holds overseas mineral property projects, however, these are not considered material and as a result no further disclosure of mineral property tenement information has been included in the consolidated schedules of information. All expenditure incurred to date on these projects were written off during the year ended 30 June 2009. Environmental Contingency The Consolidated Entity’s exploration, evaluation and development activities are subject to various national, state and local laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restr ict ive. The Consolidated Entity has made, and expects to make in the future, expenditures to comply with such laws and regulations. The impact, if any, of future legislative or regulatory changes cannot be determined. The following table summarises the Consolidated Entity’s interest in mineral properties as at 30 June 2009:
Acquisit ion Expenditure Assets
Disposed
Transfer to mine property development
Transfer to plant and
equipment Carrying
value Areas of interest A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Spinifex Ridge 3,555 - - - 3,555
Glen Eden - 334 - - - 334
Mt Pleasant - 172 - - - 172
Mt Tennyson - 194 - - - 194
Balance at 30 June 2009 - 4,255 - - - 4,255
The following table summarises the Consolidated Entity’s interest in mineral properties as at 30 June 2008:
Acquisit ion Expenditure Assets
Disposed
Transfer to mine property development
Transfer to plant and
equipment Carrying
value Areas of interest A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Spinifex Ridge 5,100 56,010 - (54,141) (6,969) -
Glen Eden - 292 - - - 292
Mt Pleasant - 148 - - - 148
Mt Tennyson - 152 - - - 152
Overseas Projects - 49 - - - 49
Projects held by Big Island Mining Ltd - 4,209 (4,209) - - -
Balance at 30 June 2008 5,100 60,860 (4,209) (54,141) (6,969) 641
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The following table summarises the Consolidated Entity’s interest in mineral properties as at 30 June 2009:
Areas of interest Spinifex
Ridge Glen Eden Mt
Pleasant Mt
Tennyson Overseas
Projects Total A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Balance 1 July 2008 - 292 148 152 49 641
Project exploration and evaluation expenditures
Exploration Accommodation 24 - - - - 24
Consultants fee - - - - - -
Dril ling & assaying costs 2,130 - - - - 2,130
Labour expenses 824 22 16 20 - 882
Tenement costs - 12 7 11 5 35
Other exploration costs 111 8 1 11 4 135
Evaluation
Engineering 255 - - - - 255
Heritage costs 86 - - - - 86
Mining 43 - - - - 43
Labour expenses 38 - - - - 38
Tenement costs 7 - - - - 7
Other 37 - - - - 37
Total expenditure 3,555 42 24 42 9 3,672
Exploration expenditure write off - - - - (58) (58)
Exploration and evaluation expenditure capitalised 3,555 42 24 42 (49) 3,614
Balance 30 June 2009 3,555 334 172 194 - 4,255
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The following table summarises the Consolidated Entity’s interest in mineral properties as at 30 June 2008:
Areas of interest Spinifex
Ridge Glen Eden
Green-bushes
Mt Pleasant
Mt Tennyson
Overseas Projects Total
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 Balance 1 July 2007 43,337 180 83 102 105 0 43,807
Acquisit ion property payment 38 - - - - - 38
Project exploration and evaluation expenditures
Exploration Accommodation - 3 - 1 3 5 12
Consultants fee - 2 - - - - 2
Labour costs - 81 3 30 21 18 153
Tenement costs - 10 1 8 22 19 60
Other exploration costs - 16 - 7 1 7 31
Evaluation Engineering 1,365 - - - - - 1,365
Environment costs 379 - - - - - 379
Financing costs 1,081 - - - - - 1,081
Geological and resources definition 1,997 - - - - - 1,997
Heritage costs 206 - - - - - 206
Hydrology fee 637 - - - - - 637
Metallurgy 598 - - - - - 598
Mining 411 - - - - - 411 Project manager costs (inc luding detailed design) 9,739 - - - - - 9,739
Tail ing 100 - - - - - 100
Tenement costs 7 - - - - - 7
Other evaluation costs 1,214 - - - - - 1,214
Total expenditure 17,734 112 5 46 47 49 17,992
Exploration expenditure write off (88) (88) Exploration and evaluation expenditure capitalised 17,734 112 (83) 46 47 49 17,904
Transfer to mine property development expenditure (54,141) - - - - - (54,141)
Transfer to plant and equipment (6,969) - - - - - (6,969)
Balance 30 June 2008 - 292 - 148 152 49 641
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Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 13. MINE P R O P E R T Y DE V E L O P ME NT A$’000 A$’000 A$’000 A$’000
Carrying amount at the beginning of the year 91,099 - - -
Expenditure transferred from exploration and evaluation - 54,141 - -
Expenditure incurred 44,820 36,958 - -
Carrying amount at end of the year 135,919 91,099 - - The following table details the consolidated development expenditures on interest in Spinifex Ridge Project:
Opening Balance 1 July 91,099 -
Transfer from exploration and evaluation - 54,141
Project development expenditure Project management costs 8,087 6,992
Project office costs 1,106 354
Engineering procurement construction management scope of works 270 1,454
WorleyParsons contractor fee & expenses ( i) 21,861 17,613
Owner’s Costs (i i) 4,463 6,726
Borrowing costs capitalised 8,167 1,141
Exploration costs ( ii i) 866 2,678
Closing Balance 30 June 135,919 91,099
(i) Costs incurred for the engineering, procurement, and construction management (“EPCM”) of the Spinifex Ridge
Molybdenum Project. (ii) Spinifex Ridge costs incurred outside the scope of the EPCM scope of works, inc luding project office, environment,
land holding, information technology and power station costs. (ii i) Costs incurred on the geological and resource definition of the Spinifex Ridge Molybdenum mine. (iv) Encumbrances are disclosed under note 15 (i i).
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Impairment Test Carrying amount Mine property development together with plant and development – capital work in progress is related to the group’s proposed Spinifex Ridge molybdenum mine as follows:
A$’000
Mine property development 135,919
Plant and equipment – capital work in progress 59,715
195,634 Key assumptions used in value in use calculations The recoverable value of the Spinifex Ridge molybdenum mine assets has been determined based on a value in use calculation using cash flow projections as at 30 June 2009 based on a 10 million tonne per annum throughput rate. Molybdenum and copper recovered is based on JORC and NI43-101 compliant reserve statements. Company internal financial models are based on an expansion of the project to 20 mill ion tonnes per annum from year seven. For impairments tests, in accordance with Australian accounting standards, no allowance is made for any expansion beyond 10 mill ion tonnes per annum. The calculation of value in use is most sensit ive to the following assumptions:
Management Assumption
Available reserves 451 mllion tonnes
Reserve grade 0.05% Mo/0.08% Cu
Mine l ife (at 10 million tonnes) Up to 45 years
Molybdenum prices US$20/lb
Discount rate (pre tax, real) 12.3%
Capital cost A$674 mill ion Available reserves – available reserves for the model are based on exis ting defined reserves. As detailed in Note 2 Significant accounting judgements, exist ing reserves are estimated in accordance with the JORC (and NI43-101) code. Molybdenum prices – the company has estimated a long term price of $US20 per pound. The value has been based on independent studies indicating that increased molybdenum demand will largely need to be met by new primary minesand reflects the company’s expectations of industry wide total operating and capital costs for these large new primary mines. Discount rate – the discount rate reflects management’s estimate of the time value of money and the risks associated with the project. The discount rate has been based on the project weighted average cost of capital assuming a long term debt equity ratio of 30/70. Capital cost – the capital cost estimate for a 10Mtpa development is based on a definitive feasibil ity study for a 20Mtpa development, reduced in scale to a 10Mtpa throughput rate as a separate study, the results of which were announced in late 2007. Sensit ivity to changes in assumptions There are reasonable possible changes in key assumptions that could cause the carry ing value of assets to exceed its recoverable amount. The actual recoverable amount of the Spinifex Ridge molybdenum mine per management’s value in use model exceeds its carry ing value by approximately $33 million. The implications of the key assumptions on the recoverable amount are discussed below: • Molybdenum prices – management has considered the possibility of lower than budgeted long term molybdenum prices
that might result from lower industry wide input costs and an excess of supply over demand. A reduction in average long term price below US$19.60 per pound would result in the value in use less than the assets carry ing amount.
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• Discount rate – management recognises that actual time value of money may vary to what they have estimated.
Management notes that the discount rate would have to increase to 12.7% pre tax, real for the recoverable amount of the Spinifex Ridge molybdenum mine assets to fall below their carrying amount.
Value in use subject to project financing Management has completed a definit ive feasibili ty study, and subsequent reduced throughput study, for the Spinifex Ridge molybdenum mine and is currently progressing f inancing discussions. The value in use calculation assesses recoverable amount based on the operation of the mine which is predicated on its financing. The company is confident that f inancing will be available for the project. However, if f inancing cannot be achieved, there is uncertainty as to the recoverable value of the mine property development and plant and equipment – capital work in progress assets. Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000
14. T R A DE A ND O T H E R P A Y A B L E S
Trade payables 248 16,282 248 16,282
Accruals 20,713 15,849 457 15,849
Other payables 181 302 180 302
21,142 32,433 885 32,433 Trade and other payables are non-interest bearing and generally settled on 30 day terms. Due to the short-term nature of the payables, their carrying amount is assumed to approximate their fair value. 15. INT E R E S T B E A R ING L IA B IL IT IE S Current
Obligations under f inance leases (note 23) 19 247 19 247
Notes (i) 205,548 - - -
205,567 247 19 247
Non-Current
Obligations under f inance leases (note 23) 77 96 77 96
(i) During the year ended 30 June 2009 the Consolidated Entity entered into a US$150.000 million debt financing facil ity
with various funds associated with the Trust Company of the West (“TCW”). On 26 September 2008 the Consolidated Entity drew down the f irst tranche of the debt f inancing facili ty of US$30.000 mill ion. The second tranche of US$120.000 million was drawn down on 31 October 2008. The Company’s 100% owned subsidiary Moly Metals Australia Pty Ltd issued Notes with an aggregate principal value of US$150.000 mill ion following the draw downs. The Notes were due for repayment (including interest) on 31 October 2009, being 12 months from the receipt of the second tranche and bear interest at the rate of 20% per annum compounded quarterly . The effective interest rate is 32.80% per annum. In September 2009, the Company agreed a Restructure Term Sheet with TCW that included an immediate one month extension of the maturity date to 30 November 2009. Upon the issue of the Notes under the second tranche the Company issued 12,928,751 Warrants to the Noteholders and upon shareholder approval on 27 November 2008 issued a further 4,945,367 Warrants to the Noteholders. The Warrants have a 10 year maturity and are exercisable into 1 new ordinary share in the Company for each Warrant held at an exercise price of A$0.0001 (see note 17).
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Below is a further break down of the Notes balance detailed above.
A$’000
Notes 178,784
Interest accrued 26,764
205,548
(ii) Finance leases agreements have a lease term of 5 years with the option to purchase the asset at the completion of the lease for the residual. The interest rate implicit in the lease is 8.3% (2008: 8.8%). Lease l iabil ities are secured by a charge over the leased assets.
Further details on interest bearing l iabili ties are set out in note 21.
Interest Rate, Foreign Exchange And Liquidity Risk The Company does not have any exposure to interest rate risk on its interest bearing liabil it ies as all interest bearing l iabilit ies rates are fixed.
The face value of the note (excluding interest accrued) is A$184.900 mill ion which is the equivalent of US$150.000 mill ion. The notes were converted into Australian dollars at 30 June 2009 (A$: US$ exchange rate of $0.8114).
Assets Pledged as Security Security has been pledged for the TCW loan by way of f ixed and f loating charges over all of the assets of Moly Mines Limited (MOL), Spinifex Ridge Holdings Pty Ltd (SRH), and Moly Metals Australia Pty Ltd (MMA), as well as mining mortgages granted by MMA over the Spinifex Ridge Project tenements. In addit ion, guarantees have been granted by MOL, SRH and Moly Ex Pty Ltd (MEX) guaranteeing the repayment of the loan amount by MMA. SRH, MMA and MEX are all 100% owned subsidiaries of MOL. Consolidated Parent
30 June 30 June 30 June 30 June 2009 2008 2009 2008
A$’000 A$’000 A$’000 A$,000
16. P R O V IS IO NS
Employee entitlements
Balance at beginning of year 390 142 390 142
Arising during the year 563 450 563 450
Util ised and paid out (573) (202) (573) (202)
Balance at end of year 380 390 380 390
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Consolidated Parent
30 June 30 June 30 June 30 June 2009 2008 2009 2008
A$’000 A$’000 A$’000 A$,000
17. C O NT R IB U T E D E Q UIT Y
Issued and paid up capital 154,960 153,177 154,960 153,177
Ordinary shares have the right to receive div idends as declared and, in the event of winding up the Company, to part icipate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entit le their holder to one vote, either in person or by proxy, at a meeting of the Company. Movements in shares on issue:
Number of shares
A$’000
Balance at 30 June 2007 62,321,677 68,644
Shares issued at $4.00 per share 22,000,000 88,000
Shares issued on exerc ise of options at $0.20 per share 1,500,000 300
Shares issued on exerc ise of options at $0.50 per share 50,000 25
Shares issued on exerc ise of options at $0.75 per share 50,000 38
Shares issued on exerc ise of options at $1.00 per share 100,000 100
Shares issued on exerc ise of options at $1.40 per share 170,000 238
Less: share issue costs - (4,168)
Balance at 30 June 2008
86,191,677 153,177
Shares issued on exerc ise of options at $0.20 per share (i) 7,500,000 1,500
Add: Share issue costs refunded - 283
Balance at 30 June 2009
93,691,677 154,960
Effective 1 July 1998, the Corporations Legislation abolished the concepts of authorised capital and par value shares. Accordingly, the Company does not have authorised capital nor par value in respect of its issued capital. Notes on movement in shares on issue in the 2009 financial year
• A total of 7,500,000 Options were exercised during the f inancial year (2008: 1,870,000), refer to note 27 for details Share options Details of options on issue are provided at note 27. At 30 June 2009, there were 6,155,000 (2008: 15,425,000) options over unissued shares in the Company outstanding. Warrants 17,874,118 warrants were issued during the year. The Warrants have a 10 year maturity and are exercisable into 1 new ordinary share in the Company for each Warrant held at an exercise price of A$0.0001. F
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Consolidated Parent
30 June 30 June 30 June 30 June 2009 2008 2009 2008
A$’000 A$’000 A$’000 A$,000
18. R E S E R V E S A ND R E T A INE D E A R NING S / ( A C C UM UL A T E D L O S S E S ) Reserves
Share based payments 3,695 2,931 3,695 2,931
Warrants 4,505 - 4,505 -
8,200 2,931 8,200 2,931
Reserves – share based payments
Reserves at the beginning of the f inancial year 2,931 1,491 2,931 1,491
Share based payment benefit expenses 764 1,440 764 1,440
Reserves at the end of the financial year 3,695 2,931 3,695 2,931 This reserve is used to record the value of share based payment benefits provided to employees and Directors as part of their remuneration. Reserves – warrants
Reserves at the beginning of the f inancial year - - - -
Warrants issued net of tax 4,505 - 4,505 -
Reserves at the end of the financial year 4,505 - 4,505 - This reserve is used to record the fair value of 17,874,118 warrants issued to various funds associated with The Trust Company of the West. The Warrants have a 10 year maturity and are exerc isable into 1 new ordinary share in the Company for each Warrant held at an exercise price of $0.0001. Retained Earnings / (Accumulated Losses)
Accumulated losses at the beginning of the financial year 505 (3,760) 505 (3,550)
Net profit / ( loss) attributable to members of the Company (48,179) 4,265 (48,179) 4,055
Accumulated profit / (losses) at the end of the financial year (47,674) 505 (47,674) 505
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Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$,000 19. K E Y M A NA G E ME NT P E R S O NNE L (a) Compensation of Key Management Personnel
Short-term employee benefits 2,179 1,646 2,179 1,646
Post-employment benefits 149 105 149 105
Share-based payment 334 714 334 714
2,662 2,465 2,662 2,465 (b) Remuneration options In January 2009, the Company announced that it had agreed to issue 920,000 unlisted options exercisable at $0.40 per share expiring 31 December 2010 to directors of the Company, 520,000 to the Chief Executive Officer and 100,000 each to four Non-Executive Directors’, subject to shareholder approval. During the June 2009 quarter, Mr David Craig was appointed Chairman of Moly Mines and pursuant to his contractual arrangements wil l also be issued 100,000 unlisted options, also exercisable at A$0.40 per share expir ing 31 December 2010. All of the above options were agreed to be issued to the Directors subject to shareholder approval. Shareholder approval has not been requested at this stage. These options wil l vest immediately once they are approved by shareholders. Other than noted above there were no options granted to Directors during the f inancial year ended 30 June 2009.
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(c) Option holdings of Key Management Personnel Refer to the Remuneration Report and note 27 for full details of options issued during the f inancial year. Options issued to Key Management Personnel during the year are only exercisable after the vesting period is met. Option holdings of Key Management Personnel are as follows:
2009 Year
Balance at 1 July 2008
Granted as Remuneration
Options Expired
Options Lapsed
Balance at 30 June 2009
Vested and Exercisable
Vested and Exercisable
Not Vested or Exercisable
No. No. No. No. No. No. % No.
Directors
P. Willis 300,000 - (120,000) (180,000)(i) - - - -
D. Fisher 1,300,000 - (520,000) - 780,000 780,000 100 -
P. Thomas 180,000 - - - 180,000 180,000 100 -
D. Constable 250,000 - (100,000) - 150,000 150,000 100 -
Total 2,030,000 - (740,000) (180,000) 1,110,000 1,110,000 -
Specif ied Executives
A. Worland 500,000 200,000 (200,000) - 500,000 500,000 100 -
C. Thorp 1,000,000 400,000 (400,000) - 1,000,000 1,000,000 100 -
J. McEvoy 500,000 200,000 (200,000) - 500,000 500,000 100 -
M. Gloyne 300,000 120,000 (120,000) - 300,000 300,000 100 -
Total 2,300,000 920,000 (920,000) - 2,300,000 2,300,000 - (i) Mr Willis's options lapsed not having achieving the vesting conditions prior to his resignation as a Director
of the Company on 10 March 2009.
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2008 Year
Balance at 1 July 2007
Granted as Remuneration
Options Exercised
Net Change Other
Balance at 30 June 2008
Vested and Exercisable
Vested and Exercisable
Not Vested or
Exercisable
No. No. No. No. No. No. % No.
Directors
P. Willis 300,000 - - - 300,000 120,000 40 180,000
D. Fisher 1,300,000 - - - 1,300,000 520,000 40 780,000
P. Thomas 300,000 - (120,000) - 180,000 - - 180,000
D. Constable 250,000 - - - 250,000 100,000 40 150,000
M. Senft - - - - - - - -
C. Agnew - 250,000 - (250,000)(i) - - - -
Total 2,150,000 250,000 (120,000) (250,000) 2,030,000 740,000 36 1,290,000
Specif ied Executives
A. Worland 500,000 - - - 500,000 200,000 40 300,000
C. Thorp 1,000,000 - - - 1,000,000 400,000 40 600,000
J. McEvoy 500,000 - - - 500,000 200,000 40 300,000
M. Gloyne - - - 300,000(ii) 300,000 120,000 40 180,000
Total 2,000,000 - - 300,000 2,300,000 920,000 40 1,380,000 (i) Mr Agnew’s options are no longer c lassified as Key Management Personnel options due to his resignation as
a Director of the Company at 31 May 2008. (ii) Mr Gloyne was appointed as General Manager - Operations as at 16 March 2008.
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(d) Shareholdings of Key Management Personnel of the Group
2009 Year Balance at
1 July 2008 Purchases /
(Sales) On Exercise
of Options Net Change
Other Balance at
30 June 2009
No. No. No. No. No.
Directors
D Craig - - - - -
P. Willis (i) 100,000 - - (100,000) -
D. Fisher 1,103,600 - - - 1,103,600
P. Thomas 180,000 (180,000) - - -
D. Constable 10,000 - - - 10,000
M. Senft - - - - -
J.D. Nixon - - - - -
K. Talbot - - - - -
Total 1,393,600 (180,000) - (100,000) 1,113,600
Specif ied Executives
A. Worland 40,000 - - - 40,000
C. Thorp 24,255 7,027 - - 31,282
J. McEvoy 18,200 - - - 18,200
M. Gloyne 1,000 - - - 1,000
Total 83,455 7,027 - - 90,482
(i) Mr Willis’s shares are no longer classif ied as Key Management Personnel options due to his resignation as a Director of the Company on 10 March 2009.
2008 Year Balance at
1 July 2007 Purchases /
(Sales) On Exercise
of Options Net Change
Other Balance at
30 June 2008 No. No. No. No. No.
Directors
P. Willis 100,000 - - - 100,000
D. Fisher 1,103,600 - - - 1,103,600
P. Thomas 50,000 10,000 120,000 - 180,000
D. Constable 10,000 - - 10,000
M. Senft - - - - -
J.D. Nixon - - - - -
Total 1,253,600 20,000 120,000 1,393,600
Specif ied Executives
A. Worland 40,000 - - - 40,000
C. Thorp 24,255 - - - 24,255
J. McEvoy 18,200 - - - 18,200
M. Gloyne - - - 1,000 1,000
Total 82,455 - - 1,000 83,455
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(e) Other transactions with Key Management Personnel and their related part ies
During the year land management services totalling $283,003 (2008: $192,460) have been provided to Group companies by Dr Fisher’s wife as an employee of Tri llium Pty Ltd. These services were provided on terms and condit ions that were no more favourable than those that it is reasonable to expect would have been adopted if dealing at arm’s length with an unrelated party. Mr K Talbot was appointed as a director in accordance with the TCW interim finance facility agreement (Refer Note 15 (i)). 20. E A R NING S / ( L O S S ) P E R S H A R E The following reflects the income and share data used in the calculation of basic and diluted profit / ( loss) per share: Consolidated 30 June 30 June 2009 2008 A$’000 A$’000 Profit / ( loss) used in calculating basic and diluted earnings / (loss) per share
Net profit /( loss) attributable to ordinary equity holders of the parent (48,179) 4,265 Number of
Shares Number of
Shares
Weighted average number of ordinary shares used in calculating basic earnings / ( loss) per share 88,662,910 75,491,704
Share options considered as dilutive - 8,598,849
Weighted average number of ordinary shares used in calculating the diluted earnings / (loss) per share 88,662,910 84,090,553 (i) At 30 June 2009, 6,155,000 share options and 17,874,118 warrants are not considered dilut ive as the conversion of the
options to ordinary shares wil l result in a decrease in the net loss per share.
(ii) In September 2009, the Company agreed a Restructure Term Sheet with Trust Company of the West (“TCW”) that included a condit ion the Company complete an equity financing of a minimum of US$25 million. Further detail of this restructure and equity f inancing is located in the Financial Position section of the Directors’ Report. Apart from this equity f inancing there has been no transactions involving ordinary shares or potential ordinary shares that would signif icantly change the number of ordinary shares or potentially ordinary shares outstanding between the reporting date and the date of completion of these financial statements.
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21. C O MMIT ME NT S & C O NT ING E NC IE S Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 (a) Mineral tenement leases A$’000 A$’000 A$’000 A$’000
Within 1 year 591 380 - 380 Under the terms and condit ions of the Group’s t itle to its various mining tenements, it has an obligation to meet rentals and minimum levels of exploration expenditure per annum as gazetted by the Department of Industry and Resources of Western Australia, as well as local government rates and taxes. (b) Spinifex Ridge Project commitments The outstanding capital commitments relating to the Spinifex Ridge Molybdenum Project at 30 June 2009 are:
Within 1 year 2,067 191,451 - -
Within 1 to 5 years - 15,875 - -
2,067 207,326 - - The Consolidated Entity has signed major contracts with the following suppliers. Costs have already been recognised for certain of these contracts at period end. • With the ThyssenKrupp subsidiary, Polysius, for the supply of €52,039,123 of long lead items for the processing
plant/concentrator, which include 1 Primary crusher, 3 High Pressure Grinding Roll units, and 2 Ball Mil ls. The remaining commitments owing at 30 June 2009 amount to €198,286 (equivalent to $345,286).
• With the ThyssenKrupp subsidiary, Polysius, for the value of €10,952,403 for a semi mobile crusher. The remaining commitments owing at 30 June 2009 amount to €63,225 (equivalent to $109,937).
• With Metso Minerals (Australia) Limited for the supply of the long lead secondary crusher for the value of $13,330,580. The remaining commitments owing at 30 June 2009 amount to $1,611,896.
• With WorleyParsons for an Engineering, Procurement, and Construction Management “(EPCM”) contract for the construction of the Spinifex Ridge 20 million tonne per annum treatment plant and related infrastructure. The estimated value of the reimbursable contract is $100,170,442 and is based on the project proceeding as currently planned. The EPCM contract includes an incentive based compensation scheme that wil l reward WorleyParsons for meeting key project milestones. The contract is currently in a reduced services period whilst the Consolidated Entity seeks full project funding.
• With MacMahon Holdings Limited (“MacMahon’s) for a 7 year mining and earthmoving contract valued at $1,142,273,000. The contract was awarded in February 2008 to ensure that the equipment required to develop the mine wil l be available in t ime for a 32 million tonne waste pre-strip to be completed prior to the commissioning of the processing fac il ities at Spinifex Ridge. The contract requires Moly Mines to advise MacMahon’s of the commencement date for the beginning of the contract. The contract has not commenced.
The Company has the option to terminate the above contracts at any time at its convenience provided that the Company pays all costs incurred by the supplier up to the date of termination.
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Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000 (c) Lease commitments
Finance leases – as lessee
Not later than 1 year 26 264 26 264
Later than 1 year and not later than 5 years 83 109 83 109
Total minimum lease payments 109 373 109 373
Finance charges (13) (30) (13) (30)
96 343 96 343
Current 19 247 19 247
Non Current 77 96 77 96
96 343 96 343
Operating leases
Not later than 1 year 380 774 380 774
Later than 1 year and not later than 5 years 991 1,357 991 1,357
1,371 2,131 1,371 2,131
(d) Bank guarantees At 30 June 2009 the Group had the following bank guarantees which are unrecognised: Office lease guarantees 284,218
Corporate credit card guarantees 124,000
Tenement environmental guarantees 1,721,000
(e) Contingent l iabili ties The Directors’ are not aware of any circumstance or information which leads them to believe there are any material contingent liabil it ies outstanding or l ikely to be outstanding as at 30 June 2009.
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Consolidated Parent
30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$’000 22. C A S H F L O W S T A T E M E NT Reconcil iation of operating loss after tax to net cash f lows from operations
Profit /(loss) from ordinary activit ies (48,179) 4,265 (48,179) 4,055
Non cash items:
Depreciation and amortisation of plant and equipment 331 60 331 60
Profit /( loss) on disposal of fixed assets - (7) - (7)
Profit on disposal of Big Island Mining - (7,134) - (6,924)
Exploration expenses written off 181 225 181 225
Security deposit expenses written off 1,000 - - -
Share based payment benefit expenses 327 288 327 288
Share of loss of associate 174 120 - -
Impairment / (Reversal of impairment) of investment in associate (54) 1,620 120 1,740
Fair value movement of options held in associate 459 1,963 459 1,963
Interest income c lassified as investing (1,271) (3,235) (1,028) (3,235)
Loss on re-measurement of non-current assets held for sale 38,916 - - -
Impairment of capital work in progress assets 5,631 - - -
Borrowing costs 24,248 - 597 -
Unrealised foreign currency movements (24,087) - - -
Income tax benefit (1,930) - (1,930) -
Changes in assets and liabil it ies:
(Increase) / decrease in receivables 370 (182) 45,313 (182)
Increase / (decrease) in payables 7 101 7 101
Increase in provisions (2) 248 (2) 248
Net cash inflows/outf low from operations (3,879) (1,668) (3,804) (1,668)
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94
23. F INA NC IA L R IS K MA NA G E ME NT The Group’s principal f inancial instruments comprise receivables, payables, f inance leases and cash and short-term deposits. The Group manages its exposure to a variety of f inancial r isks, market r isk (including currency risk, commodity price risk and interest rate r isk), credit r isk, liquidity r isk and cash f low interest rate risk in accordance with the Audit and Risk Management Committee Charter and specif ic approved Company policies. These policies are developed in accordance with the Company’s operational requirements. Currently the Group has one investment policy with the purpose of maximis ing the return on surplus cash with the aim of outperforming the benchmark, within acceptable levels of risk return exposure and mit igate the credit and liquidity r isks that the Group is exposed to through investment activ it ies. Primary responsibil ity for the identification and control of f inancial risks rests with the Audit and Risk Management Committee under the authority of the Board. The Committee reviews and agrees policies for managing each of the risks identif ied. The Group uses different methods to measure and manage different types of r isks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessment of market forecast for interest rate and foreign exchange. The Group manages credit risk by only dealing with recognised, creditworthy, third part ies and liquidity risk is monitored through the development of future roll ing cash flow forecasts. Commodity price r isk The Group’s policy is to sell its commodity products at current market prices. Once in production the Group expects to have an exposure to commodity price r isk associated with the production and sale of molybdenum, copper, iron ore and s ilver. Interest rate risk The Group’s current exposure to the risk of changes in market interest rates relate primarily to cash assets rates and is managed by the Board (and Audit and Risk Management Committee) approved investment policy. This policy defines maximum exposures and credit ratings l imits. The Group expects to seek financing for the development of the Spinifex Ridge Molybdenum Project when it is considered that the debt markets have recovered suff iciently to raise the required funds. It is expected that this funding wil l be achieved through a mix of debt and equity. The debt is expected to be at a fixed interest rate. The Group does not account for fixed rate f inancial assets and l iabili ties at fair value through profit or loss.
Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$’000 A$’000 A$’000 A$’000
Financial assets
Cash at bank and money market investment 64,012 48,578 34 48,578
The following table summarises the impact of reasonably possible changes in interest rates for the Consolidated Group and the Parent entity at 30 June 2009. The sensitivity is based on the assumption that interest rate changes by 25 basis points (2008: 80 basis points) with all other variables held constant. The 25 basis points sensit ivity is based on reasonably possible changes over a f inancial year. The analysis is performed on reduced basis to the comparative period due to the reduction in the interest rate this period.
Impact on post tax profit and equity Higher / (lower)
25 bp increase (2008: 80 bp) 160 389 - 389
25 bp decrease (2008: 80 bp) (160) (389) - (389)
The difference in the impact on post tax profit is due to lower interest income from cash on hand as most of the cash is now held in US dollars, the interest rate for US dollars is significantly less than can be achieved if the cash was held in Australian dollars. The sensit ivity is lower in 2009 than in 2008 because the US dollar interest rate is virtually zero and it is not anticipated that it wil l move signif icantly in the near future.
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95
Foreign currency r isk The Group has significant foreign currency risk exposure on cash reserves and borrowings and has transactional exposures aris ing from foreign currency contracts for the purchase of long lead capital items. The Group is exposed to movements in US dollar currency on cash reserves and borrowings. It also has exposure to the EURO dollar on the long lead capital contracts. The Group has the option to terminate these contracts at any time for its convenience provided that the Group pays all costs incurred by the supplier up to the date of termination. The Group’s currency exposure is limited to costs incurred by the supplier up to the date of termination. At 30 June 2009 the Group had the following exposure to foreign currencies and they were not designated in a cash f low hedge. Consolidated Parent
30 June 30 June 30 June 30 June 2009 2008 2009 2008 A$’000 A$’000 A$’000 A$’000
Financial Liabil ities
Cash and cash equivalents
- USD 63,688 - - -
Interest bearing liabil it ies
- USD (205,548) - - -
Trade and other payables
- EURO (18,267) (1,692) (18,267) (1,697)
- USD - (338) - (338)
Net exposure (160,127) (2,030) (18,267) (2,030)
The following table summarises the impact of reasonably possible changes in foreign currency exchange rates for the Consolidated Group and the Parent entity at 30 June 2009 on recognised financial liabil it ies at the balance sheet date. The sensitivity is based on the assumption that exchange rate changes by increasing 10% and decreasing 5% with all other variables held constant. These 10% and 5% sensit ivity are based on reasonably possible changes over a f inancial year, using the observed range of actual historical rates for the preceding 3 year period. The analysis is performed on the same basis for the comparative period.
Impact on post tax profit and equity Financial Liabil ities Higher / (lower)
AUD/EURO +10% 1,827 169 1,827 169
AUD/EURO -5% (913) (85) (913) (85)
AUD/USD +10% 14,186 34 - 34
AUD/USD -5% (7,093) (17) - (17)
There was an impact on post tax profit due to the following factors: • There being US Dollars cash held at the 2009 balance date. • There being a US Dollar loan held at the 2009 balance date. • There being US Dollar and Euro foreign currency l iabili ties at the 2009 and 2008 balance date. Moly Mines has signed contracts for the following capital items with the following suppliers: • With the ThyssenKrupp subsidiary, Polysius, for the supply of long lead items for the processing plant/concentrator.
The remaining commitments owing at 30 June 2009 amount to €198,286 (equivalent to $345,286). • With the ThyssenKrupp subsidiary, Polysius, for a semi mobile crusher being a long lead item. The remaining
commitments owing at 30 June 2009 amount to €63,225 (equivalent to $109,937).
The Group is exposed to movements in foreign currency rates on these contracts, the Group does not have a formal policy to mitigate foreign currency risks.
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96
Credit r isk Credit r isk arises in the event that a counterparty wil l not meet its obligations under a f inancial instrument leading to f inancial losses. The Group is exposed to credit risk from its operating activities, financing activities including deposits with banks. The credit risk control procedures adopted by the Group is to assess the credit quality of the institut ion with whom funds are deposited or invested, taking into account its f inancial posit ion and past experiences. Investment limits are set in accordance with l imits set by the Audit and Risk Management Committee based on the counterparty credit rating. The limits are assigned to minimise concentration of risks and mitigate financial loss through potential counterparty failure. The compliance with credit limits is regularly monitored as part of day-to-day operations. Any credit concerns are highlighted to senior management. As the Group has yet to commence mining operations it has no signif icant exposure to customer credit risk. The maximum exposure to credit risk at the reporting date is the carrying value of each class of f inancial assets in the balance sheet. Credit Quality of Financial Assets S&P Credit rating
AAA A1+ Unrated
$’000 $’000 $’000
30 June 2009
Cash & cash equivalents 12 64,000 -
Other receivables 286 2,290 475
Number of counterparties 3 17 5
Largest counterparty (%) 95% 99% 84%
30 June 2008 Cash & cash equivalents 15 48,578 -
Other receivables 1,983 819 209
Number of counterparties 3 18 5
Largest counterparty (%) 98% 32% 63%
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97
Liquidity risk The responsibil ity for l iquidity r isk management rests with the Board of Directors. The Group manages liquidity risk by maintaining suff icient cash or credit fac il ities to meet the operating requirements of the business and investing excess funds in highly liquid short term investments. The Group’s l iquidity needs can be met through a variety of sources, inc luding: cash generated from operations, short and long term borrowings and issue of equity instruments. Alternatives for sourcing the Company’s future capital needs include current cash position, future operating cash f low, project debt financings and equity raisings. These alternatives are evaluated to determine the optimal mix of capital resources for our capital needs. The following table details the Company and Group’s non-derivative f inancial instruments according to their contractual maturit ies. The amounts disclosed are based on contractual undiscounted cash f lows. As a result, these balances may not agree with the amounts disclosed in the balance sheet. During the year ended 30 June 2009 the Consolidated Entity entered into a US$150 million debt f inancing fac il ity with various funds associated with the Trust Company of the West. The Loan is due for repayment on 31 October 2009, being 12 months from the receipt of the second tranche of the Loan. Further details of the loan are provided at Note 15. The Company has agreed terms for the restructure of the debt. Further detail of the restructure is located in the Financial Posit ion section of the Directors ’ Report and in note 2.
Less than 6
months 6 months – 12 months 1-2 years > 2 years
$’000 $’000 $’000 $’000
Consolidated entity at 30 June 2009
Trade and other payables 21,142 - - -
Interest bearing liabil it ies 211,643 13 26 57
232,785 13 26 57
Consolidated entity at 30 June 2008
Trade and other payables 32,433 - - -
Interest bearing liabil it ies 161 103 26 83
32,594 103 26 83
Parent at 30 June 2009
Trade and other payables 885 - - -
Interest bearing liabil it ies 13 13 26 57
898 13 26 57
Parent at 30 June 2008
Trade and other payables 32,433 - - -
Interest bearing liabil it ies 161 103 26 83
32,594 103 26 83 F
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98
Capital risk management The Group’s total capital is defined as equity attr ibutable to equity holders of the parent, cash and cash equivalents. The balance of equity at 30 June 2009 was $134,648,811, (30 June 2008: $156,613,489). The Group’s capital management objectives are to: • safeguard the business as a going concern; • maximise potential returns for shareholders through minimising dilut ion; and • retain an optimal debt to equity balance in order to minimise the cost of capital; The Group may issue new shares or sell assets to reduce debts in order to maintain the optimal capital structure. The Group does not currently have a dividend policy. 24. R E L A T E D P A R T Y DIS C L O S U R E Details of Controlled Entities
Name Country of Incorporation % Equity Interest Investment $
2009 2008 2009 2008
Moly Metals Australia Pty Ltd Australia 100 100 100 100
Copper Metals Australia Pty Ltd Australia 100 100 100 100
Spinifex Ridge Holdings Pty Ltd Australia 100 100 1 1
Moly Ex Pty Ltd Australia 100 100 1 1
Moly Metals Scandinavia Norway 100 100 23,266 23,266
Details of Related Party Transactions The parent entity has related party transactions with its subsidiaries whereby the parent funds and pays for the exploration and evaluation expenses incurred by its subsidiaries. These expenses are charged to the subsidiaries through intercompany loans. The outstanding balance for related party receivables is disclosed in note 6. The parent entity has incurred the following expenditure on behalf of its subsidiaries:
2009 2008 A$’000 AS’000
Moly Metals Australia Pty Ltd 131,508 87,428 Moly Ex Pty Ltd 700 -
Moly Mines sold its 100% interest in Big Is land Mining Limited to Cortona Resources Limited on 5 July 2007. Refer note 7 for full details . 25. S E G M E NT INF O R M A T IO N The Group operates in the one business segment being the base metals exploration industry and one geographic segments being Australia.
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99
26. E M P L O Y E E E NT IT L E M E NT S Provis ions Current provisions consist of the aggregate of employee entitlements for annual leave of $380,444 (2008: $390,082). Superannuation The Company contributes to a non-company sponsored or controlled superannuation fund. Contr ibutions are made to an accumulation fund and are at least the minimum required by law. There is no reason to believe that funds would not be suff icient to pay benefits as vested in the event of termination of the fund or termination of employment of each employee. 27. S H A R E B A S E D P A Y M E NT P L A NS (a) Recognised share-based payment expenses The expense recognised in the income statement in relation to share-based payments is disclosed in note 3. (b) General terms of share-based payment plans The Group has an Employee Incentive Option Scheme (“EIOS”). The Directors may, in their absolute discretion, grant options to Directors and full or part time employees of the Group for nil consideration in accordance with performance guidelines established by the Directors. The options are not quoted on the Australian Securit ies Exchange or the Toronto Stock Exchange. Under the EIOS, the exerc ise price of the option is set by the Board of Directors. The performance guidelines established by the Directors do not consider the performance of the employee when sett ing the exercise price. In the past the Group has set hurdle prices for the options issued under the EIOS. Hurdle prices are no longer set for options issued. When a partic ipant ceases employment prior to the vesting of their share options, the share options are forfeited unless cessation of employment is due to termination init iated by the Group or death. There are a number of different contractual l ives for the current issued options. There are no cash sett lement alternatives. The vesting period is pre-determined by the Group without considering the performance conditions. (c) Summaries of options granted The following table details the number and weighted average exercise prices (WAEP) and movements in employee share options issued during the year.
2009 No.
2009 WAEP
2008 No.
2008 WAEP
Outstanding at the beginning of the year 15,425,000 0.92 17,045,000 0.80
Granted during the year 1,975,000 0.40 250,000 5.00
Exercised during the year (7,500,000) 0.20 (1,870,000) 0.37
Expired during the year (3,235,000) 1.63 - -
Lapsed during the year (510,000) 2.81 - -
Outstanding at the end of the year 6,155,000 1.10 15,425,000 0.92
Exercisable at reporting date 6,155,000 1.10 10,854,000 0.65 F
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100
(d) Weighted average remaining contractual l ife The weighted average remaining contractual li fe for the share options outstanding as at 30 June 2009 is between 1 and 2 years (2008: 1 and 3 years). (d) Range of exercise price and weighted average share price at the date of exercise The range of exerc ise prices for options outstanding at the end of the year was $0.40 - $3.00 (2008: $0.20 - $5.00).
The weighted average share price at date of exercise for the year was $0.30 (2008: $5.60). ( f) Weighted average fair value The weighted average fair value of options granted during the year was $0.11 (2008: $2.14). (g) Option pric ing model The fair value of the equity-settled share options granted under the option plan is estimated as at the date of grant using a Black-Scholes model taking into account the terms and conditions upon which the options were granted. The following table l ists the inputs to the model used for the years ended 30 June 2009 and 30 June 2008:
2009 2008
Dividend yield (%) Nil Nil
Expected volati li ty (%) 133.59% to 134.14% 86.93% to 94.11%
Risk-free interest rate (%) 2.63% to 2.71% 6.30% to 6.47%
Expected l ife of options (years) Various Various
Option exercise price ($) $0.40 $5.00
Weighted average share price at grant date ($) $0.27 $4.16 The expected l ife of the options is based on historical data and is not necessarily indicative of exerc ise patterns that may occur. Te expected volati lity reflects the assumption that the historical volati li ty is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. (h) Details of Options 2009 Year
Opening Balance
1 July 2008
Options Issued
Options Exercised
Options Lapsed
Options Expired
Closing Balance
30 June 2009
Non-Executive Directors (i) 730,000 - - (180,000) (220,000) 330,000
Chief Executive Officer ( i) 1,300,000 - - - (520,000) 780,000
Employee ( ii) 5,645,000 1,975,000 - (130,000) (2,445,000) 5,045,000
Other ( ii i) 7,550,000 - (7,500,000) - (50,000) -
Total 15,225,000 1,975,000 (7,500,000) (310,000) (3,235,000) 6,155,000
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101
( i) Details of Non-Executive Directors and Chief Executive Officer Options Grant Date 7 February 2007
Expiry 31 December 2010
Vesting Date 30 June 2009
Exercise Price $1.40
Non-Executive Directors 330,000
Chief Executive Officer 780,000
The options granted vested on 30 June 2009 and expire on 31 December 2010. The options can be exercised at any time after the vesting date and prior to the expiry date. ( ii) Details of Employee Options
Number Grant Date Hurdle Price Exercise Price Expiry Note
45,000 13 Jul 2006 $3.00 $2.00 31 Dec 2009 1
70,000 13 Jul 2006 $5.00 $3.00 31 Dec 2009 1
2,955,000 7 Feb 2007 N/A $1.40 31 Dec 2010 2
1,893,000 23 Jan 2009 N/A $0.40 31 Dec 2010 2
82,000 18 Feb 2009 N/A $0.40 31 Dec 2010 2
5,045,000
1. The options granted vest immediately and were voluntari ly escrowed unti l 31 December 2007. The options can
be exerc ised at any time prior to the expiry date. The options are only exerc isable when the daily weighted average sale price of shares l isted on the ASX reaches the hurdle prices detailed above for not less than 5 consecutive trading days.
2. The options granted vested on 30 June 2009 and expire on 31 December 2010. ( ii i) Details of Other Options
7,500,000 options were exercised at $0.20 per share on 20 February 2009. 50,000 options were exercisable at $5.00 per share and expired on 31 December 2008
2008 Year 250,000 options were issued to Mr Agnew during the financial year. These options were approved at a general meeting of shareholders held on 27 November 2007.
Opening Balance
1 July 2007
Options Issued
Options Exercised
Options Lapsed / Forfeited
Other Clos ing Balance
30 June 2008
Non-Executive Directors (i) 850,000 250,000 - (320,000) (50,000) 730,000
Chief Executive Officer ( i) 1,300,000 - - - - 1,300,000
Employee ( ii) 5,895,000 - - (250,000) - 5,645,000
Other ( ii i) 9,000,000 - (1,500,000) - 50,000 7,550,000
Total 17,045,000 250,000 (1,500,000) (570,000) - 15,225,000 Other – options of Mr Agnew are no longer classif ied as Non-Executive Director options due to his res ignation as a Director during the financial year.
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( i) Details of Non-Executive Directors and Chief Executive Officer Options
Grant Date 7 February 2007 Total
Expiry 31 Dec 2008 31 Dec 2010
Vesting Date 31 Dec 2007 30 Jun 2009
Exercise Price $1.40 $1.40
Non-Executive Directors 220,000 510,000 730,000
Chief Executive Officer 520,000 780,000 1,300,000
Note 1 2
1. The options granted vested on 31 December 2007 and expire on 31 December 2008.
2. The options granted vested on 30 June 2009 and expire on 31 December 2010.
The options can be exerc ised at any t ime after the vesting date and prior to the expiry date. ( ii) Details of Employee Options
Number Grant Date Hurdle Price Exercise Price Expiry Note
50,000 19 May 2005 $2.50 $1.50 31 Dec 2008 1
75,000 19 May 2005 $3.50 $2.00 31 Dec 2008 1
150,000 19 May 2005 $5.00 $2.50 31 Dec 2008 1
15,000 1 Jan 2006 $3.00 $2.50 31 Dec 2008 1
15,000 I Jan 2006 $3.50 $2.50 31 Dec 2008 1
35,000 1 Jan 2006 $4.00 $3.50 31 Dec 2008 1
35,000 1 Jan 2006 $4.50 $3.50 31 Dec 2008 1
75,000 1 Jan 2006 $5.00 $3.50 31 Dec 2008 1
45,000 13 Jul 2006 $3.00 $2.00 31 Dec 2009 1
70,000 13 Jul 2006 $5.00 $3.00 31 Dec 2009 1
1,995,000 7 Feb 2007 N/A $1.40 31 Dec 2008 2
3,075,000 7 Feb 2007 N/A $1.40 31 Dec 2010 3
4,000 20 Mar 2007 N/A $1.40 31 Dec 2008 2
6,000 20 Mar 2007 N/A $1.40 31 Dec 2010 3
5,645,000
1 The options granted vest immediately and were voluntari ly escrowed unti l 31 December 2007. The options can
be exerc ised at any time prior to the expiry date. The options are only exerc isable when the daily weighted average sale price of shares l isted on the ASX reaches the hurdle prices detailed above for not less than 5 consecutive trading days.
2 The options granted vested on 31 December 2007 and expire on 31 December 2008.
3 The options granted vested on 30 June 2009 and expire on 31 December 2010. (ii i) 7,500,000 options are exercisable at $0.20 per share and expired on 11 March 2009.
50,000 options are exercisable at $5.00 per share and expired on 31 December 2008
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103
28. A U DIT O R ’ S R E M U NE R A T IO N The auditor of Moly Mines Limited is Ernst & Young. Amounts received or due and receivable by Ernst & Young (Australia) for: Consolidated Parent
30 June 30 June 30 June 30 June
2009 2008 2009 2008
A$ A$ A$ A$
Audit fees for audit and review of the financial report 169,725 95,805 169,725 95,805
Tax compliance 142,214 129,790 107,120 129,790
Other non audit services 7,725 63,345 7,725 36,751
319,664 288,940 284,570 262,346
Other services inc lude corporate advice sought by the Group during the course of the f inancial year. 29. S U B S E Q U E NT E V E NT S There has not arisen in the interval between the end of the f inancial year and the date of this report any other item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect signif icantly the operations of the Group, the results of those operations or the state of affairs of the Group, in future f inancial years except for: The Company’s Interim Financing Facili ty, including accrued interest (compounded at 20% per annum), of approximately US$183 million was due for repayment by 31 October 2009. In September 2009, the Company agreed a Restructure Term Sheet with TCW that included an immediate one month extension of the maturity date to 30 November 2009, increasing the amount due to approximately US$186 million. The terms of the proposed restructure include the repayment of excess funds in the Company estimated at US$43 million. The maturity of the remaining forecast balance outstanding of US$143 mill ion is to be reset with the following maturity dates:
• US$40 million due 30 April 2009; • US$83 million due 31 October 2011; and • US$20 million due 31 October 2014.
The coupon for the remaining US$143 million wil l be 15% per annum. A condition of the restructured facility is that the Company complete an equity f inancing of a minimum US$25 million. This amount will be retained by the Company to develop and bring into production the Spinifex Ridge Iron Ore Project, complete final feasibil ity, engineering and design studies on a 10 million tonne per annum Spinifex Ridge Molybdenum Project, and also for working capital and general corporate expenses. The Company lodged a preliminary short form prospectus on 3 September 2009 and immediately commenced a public equity offering process to raise at least US$25 mill ion that would allow the completion of the restructure of the Interim Financing Facili ty.
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DIR E C T O R S ’ DE C L A R AT IO N
104
In accordance with a resolution of the Directors of Moly Mines Limited, we state that: In the opinion of the Directors: (a) the financial statements and notes of the Company and of the Consolidated Entity are in accordance with the
Corporations Act 2001, including: (i) giving a true and fair v iew of the Company's and the Consolidated Entity’s f inancial position as at 30 June
2009 and of their performance for the year ended on that date; and (ii) comply ing with Accounting Standards and Corporations Regulations 2001; and (b) subject to the matters set out in Note 2 “Going Concern” there are reasonable grounds to believe that the Company wil l
be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial period ending 30 June 2009. On behalf of the Board D. Fisher Director Perth 29 September 2009
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A S X A DDIT IO N A L IN F O R MAT IO N
105
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A S X A DDIT IO N A L IN F O R MAT IO N
106
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107
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Addit ional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows: The information is current at 12 October 2009.
S U B S T A NT IA L S H A R E H O L DE R S
Nil DIS T R IB U T IO N O F S H A R E H O L DE R S Number of Holders Number of Shares 1-1,000 1,813 930,528 1,001-5,000 1,908 5,282,251 5,001-10,000 693 5,684,935 10,001-100,000 647 18,553,782 100,001 + 52 63,794,181
Total Shareholdings 5,113 94,245,677
Number of shareholders holding less than a marketable parcel 1,189 375,960 T O P T W E NT Y S H A R E H O L DE R S Holder Number of Ordinary Shares Held % 1 Anz Nominees Limited <Cash Income A/C> 25,780,240 27.35 2 Canadian Register Control 19,570,756 20.77 3 Hsbc Custody Nominees <Australia> 3,449,573 3.66 4 Ta Securities Holdings Berhad 2,828,000 3.00 5 Citicorp Nominees Pty Limited 745,139 0.79 6 Hsbc Custody Nominees <Australia> 617,308 0.65 7 National Nominees Limited 571,973 0.61 8 Upora Pty Ltd <Looten Super Fund A/C> 552,149 0.59 9 Glickenhaus & Co 500,000 0.53 10 Queensland Investment Corporation 442,347 0.47 11 Security + Equity Resources Ltd 419,615 0.45 12 J P Morgan Nominees Australia Limited 413,935 0.44 13 Regans Ford Estate Pty Ltd 350,000 0.37 14 Merri ll Lynch (Australia) Nominees Pty Limited 337,399 0.36 15 Comsec Nominees Pty Limited 329,601 0.35 16 Dmg & Partners Securities Pte Ltd <Clients A/C> 327,969 0.35 17 Rubicon Nominees Pty Ltd 324,200 0.34 18 Cytra Serv ices Pty Ltd 300,000 0.32 19 Mr Eddie Sugar 300,000 0.32 20 Trill ium Investments Pty Ltd 300,000 0.32
Total Top 20 58,460,204 62.03
Other Shareholders 35,785,473 37.97
Total Ordinary Shares on Issue 94,245,677 100.00
R E S T R IC T E D S E C U R IT IE S
Nil
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109
S C H E DU L E O F T E NM E NT S Project Name Granted Tenements Applications
Glen Eden EL6390
Mt Pleasant EL6083
Mt Tennyson EL6017
Spinifex Ridge M45/1095, M45/1096, M45/1097, M45/1164, G45/276, L45/159, L45/160,
L45/183, L45/184, L45/185, L45/186
L45/187, L45/195, L45/196, L45/200, l45/205, E45/2744, E45/2745, E45/2746,
E45/2825, E45/3453, E45/3454
Norway Pre Claim 0381/2008-OB to 0515/2008-OB
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Moly Mines Limited has emerged with a secure platform for growth with a restructuredbalance sheet, a near term production asset in the Spinifex Ridge Iron Ore Project andthe world class, fully permitted Spinifex Ridge Molybdenum Project.
Spinifex Ridge Molybdenum – Copper Resource Area.
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MOLYMINESLIMITED
w w w . m o l y m i n e s . c o m
A S X \ T S X : M O L
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