Annual Report to shareholders
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After a difficult year in which the Company closed the 309 mine and Rishton milling operations
and restructured the business through a 10 month period of voluntary administration, BMA Gold
has emerged as a reinvigorated gold and base metals explorer and developer with cash of $1.8
million at year end and no debt.
The year of 2007 was one in which your directors were focused on raising sufficient funds to pay
creditors 100 cents in the dollar while at the same time retaining value for shareholders. Both
objectives were achieved with sufficient cash remaining to progress exploration of the
prospective Twin Hills tenements.
After closing the mine and mill safely, mining equipment and the mill were sold to raise net
proceeds of $7.4 million. The recapitalisation of the company was then completed in the final
quarter of the year when $5.5 million was successfully raised by way of a non renounceable rights
issue that was fully underwritten by Hartleys Limited. Approximately 218.8 million new shares
and approximately 131 million new options were issued pursuant to the rights issue, bringing total
shares on issue to approximately 437 million and options issued to approximately 138 million.
Since the requotation of BMA shares, trading has been vigorous with high volumes that reflect
strong interest in the gold exposure that an investment in BMA offers and in the Company's
announced plans for exploration of Twin Hills and new project generation in the coming year.
Our plans for exploration are discussed in more detail within this Annual Report.
During the year, board changes were implemented. Jim Wall (Non Executive Chairman) and
Robert Besley (Non-Executive Director) resigned and Michael O'Keeffe (Non-Executive
Director) was appointed as Non-Executive Chairman. Ken Winters is continuing as an Executive
Director and I continue as Managing Director and Chief Executive Officer. The Company has
also maintained the services of experienced geologists, Greg Jones and Jim Brigden.
I am looking forward to reporting on progress during the year as we explore Twin Hills and
identify new projects to generate wealth for shareholders. World economic fundamentals are
conducive to a strong gold price environment. The directors look forward to an exciting 2008 and
your continued support is much appreciated.
Year in Review
The year of 2007 was dominated by the impact of the disappointing reserve downgrade at the 309 mine in
January 2007. Underground infill drilling into the deeper zones of the mine (Area 2) late in 2006 and into
early 2007, revealed thinner and less continuous mineralisation than previously interpreted. A revised
Resource was calculated containing insufficient ounces per vertical metre to justify continuation of mining and
haulage of ore 280 kms to the Rishton Mill at Charters Towers. A decision was taken to suspend development
and mining after remaining economic stopes had been extracted over a period estimated to be approximately 4
to 5 weeks. This decision, incorporating a new exploration strategy, was announced on 29 January 2007 and
the Company's shares were suspended from trading. A voluntary Administrator was appointed on the
following day.
During the 2007 year, the Directors worked with the Administrator to successfully sell surplus assets and
complete a capital raising to pay off all debt with creditors receiving 100 cents in the dollar allowing for the
Company to exit administration and recommence trading on the ASX on 3 December 2007.
Operating Results
Gold shipments for the period up to the closure of the mill late in April 2007 were 4,169 ounces including third
party gold of 334 ounces. The average gold price received was $829/oz. Production was from an extension of
Area 1 at the 309 mine as well as a small higher grade stope from Area 2 together with gold reclaimed from the
mill circuit. Production statistics for the year end and up to closure of the mine and the mill are shown in the
table below.
Production summary
Recoveries in December 2006 and through 2007 up to mine closure were reduced as lower grade and more
complex mineralisation was treated from the base of Area 1 and top of Area 2. Metallurgical work revealed
that some of the gold is contained within sulphides and silicates, and it is possible that grind size and preg-
robbing were contributing factors. Further definitive test work of the cause of the reduced recoveries from
Area 1 deeps would only be required if similar mineralisation was discovered elsewhere. Recoveries were,
however, expected to improve with the full conversion of the Rishton plant to CIL as metallurgical work
confirmed that a CIL circuit would yield recoveries above 90%. This capital investment was not justified
given the decision to cease mining.
Mining ceased early in March 2007. Waste material was used to fill the void left by mining and the mine
was then closed. The site office complex has been downsized and set up to support ongoing exploration
activities. On 21 March 2007, an auction was held at the Twin Hills mine site to sell mining equipment and
other surplus assets. Net proceeds of $4.2 million were raised.
The decline and supporting development was at the 1085 RL (170m below surface) when operations were
suspended. The Plan of Operations (PoO) was scaled back to mine care and maintenance and exploration and
this PoO has been rolled over for 2 years. Importantly, the Environmental Authority (MIM800160503) allows
for mining and ore processing at the site and the Mining Lease (No 70316) has a term of 15 years from 1
January 2005. Tenements are all in good standing and licenses such as water use have been renewed.
Last gold was poured late in April 2007 and on 21 May 2007, agreement was reached with Tamaya Resources
Limited on the sale of the Rishton Mill for $3.5 million.
Resources
Ore Resource Statement
Notes: The estimated Mineral Resources were prepared in accordance with the 2004 edition of the "Australian Code for Reporting of
Exploration Results" (the "JORC Code"). The information in this presentation that relates to Mineral Resources is based on
information complied by Colin Lutherborrow, who is a Member of The Australasian Institute of Mining and Metallurgy. Information
in this report relating to Exploration Results is based on information compiled by Greg Jones, who is also a Member of the
Australasian Institute of Mining and Metallurgy. Mr Lutherborrow and Mr Jones have sufficient experience relevant to the style of
mineralisation and types of deposits under consideration and they qualify as Competent Persons as defined within the JORC Code.
Both have consented to the inclusion of the information in this report in the form and context in which it appears
Exploration drilling conducted up to the closure of the mine focused on finding high grade resources at 309 and
Lone Sister to truck the 280 kms to the Rishton mill. As previously reported, the program at 309 to test the strike
and depth extension of the resources concluded that a substantial expansion of the resource was not likely, but it
did highlight the potential to add incremental ounces at shallow depths out to the east of the project (e.g.
THRCD894 - 33m @ 5.7gpt Au from 132m, including 18m @ 9.9gpt Au).
The closure of the 309 mine resulted in BMA reviewing its goals and developing a new strategy to find sufficient
resources on the Company's tenements to justify a processing plant at site. This will require at least the doubling
of the current resource and the discovery of new ore systems with the potential to add 200,000 to 500,000 ounces.
As such, the continued exploration within 309 and Lone Sister deposits is, at present, secondary to the primary
objective of a new discovery.
Actual production from 309 was 25,000 ounces at approximately 10g/t from the relatively shallow and continuous
Area 1 mineralisation. Together with a closely drilled Area 3 resource of 72,000 ounces to a depth of just 130m,
there is cause for optimism that larger repeats of this easy to mine mineralisation exists within other areas of the
tenements.
During late 2006 and early 2007, exploration work by the Company focused on remodelling and reinterpretation
of all available geophysical information (electrical, magnetic and gravity) and combining this with all other
geological data generated within the project to date. Using advanced modelling techniques and software, the new
work has generated a clearer structural and lithological framework for the region and helped to define target areas
around the 309 deposit and between 309 and Lone Sister, 7km to the south.
The geophysical data review highlighted that much of the historic geophysical data had limitations, but indicated
that magnetics, IP/resistivity and detailed gravity appear to provide the best tools in defining further epithermal,
precious metal targets similar to 309 and Lone Sister in other parts of the project area.
B.App.Sc (Metallurgy)
Mr O'Keeffe was appointed on 25 November 2003 and Non-Executive Chairman on 22 August 2007.
He commenced work with Mt Isa Mines in 1975. Mr O'Keeffe held a series of operating positions, rising
to Executive Management level in commercial activities. Between 1995 and 2004 Mr O'Keeffe was
Managing Director of Glencore Australia Pty Ltd. He is the Executive Chairman of Riversdale Mining
Limited and has previously held directorships in Anaconda Nickel Limited and Mt Lyell Mining Co
Limited. Mr O'Keeffe was a shareholder in BMA Operations Limited prior to its acquisition by BMA
Gold Limited in January 2004.
Mark Kenneth Wheatley
Mr Wheatley was appointed on 10 July 2006. He was CEO of Toronto listed uranium miner, Southern
Cross Resources Inc from September 2003 to December 2005 and Chairman from June 2004 to
December 2005. Prior to 2003, Mr Wheatley was General Manager Corporate Development for Aurion
Gold Limited (previously Goldfields Limited), and prior thereto, he served as Senior Vice President
within the global mining team of Bankers Trust Australia Limited. Mr Wheatley started as a trainee for
BHP at Port Kembla Steelworks in 1979 and worked in a number of technical and commercial roles over
the following 17 years. Mr Wheatley continues to serve as a Non-Executive Director of Southern Cross,
renamed Uranium One Inc. following the merger with Aflease Gold and Uranium Resources Limited in
December 2005. Mr Wheatley also served as Non-Executive Director of St Barbara Limited from
November 2003 to August 2006.
Kenneth John Winters
During the year, the principal activity of the economic entity was the Twin Hills Gold Project in central
eastern Queensland. Mining operations were suspended during the year leaving the Company focussed on
exploration. Refer to the Company review on page 5 of this annual report for further detail.
Schedule of
Interest in Mining Tenements) are subject to Queensland and Federal Laws and Regulations regarding
environmental matters and the discharge of hazardous wastes and materials. The Company's projects,
like all mining projects would be expected to have a variety of environmental impacts particularly after
mine development. The Company conducts its activities in an environmentally responsible manner and
in accordance with applicable laws.
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 financial year, options to acquire 53,631 fully paid ordinary shares in BMA Gold Limited have
been exercised at an exercise price of $0.025. Since the end of the financial year, there have been 3,004
options exercised.
This report presents the remuneration arrangements in place for directors and executives of BMA Gold
Limited in accordance with the requirements of the Corporations Act 2001 and its regulations.
Remuneration philosophy
The performance of the company depends upon the calibre of its directors and executives.
The following principles are included in its remuneration framework to ensure maximum stakeholder
benefits:
Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive director and
executive remuneration is separate and distinct.
Non-executive director remuneration
The Board seeks to set aggregate remuneration at a level that provides the company with the ability to
attract and retain directors of high calibre, whilst incurring a cost that is acceptable to shareholders.
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive
directors shall be determined from time to time by a general meeting. An amount not exceeding the
amount determined is then divided between the directors as agreed. The latest determination was at the
Annual General Meeting held on 27 May 2004 when shareholders approved an aggregate remuneration of
$250,000 per year.
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it
is apportioned amongst directors is reviewed annually. The Board considers advice from external
consultants as well as the fees paid to non-executive directors of comparable companies when
undertaking the annual review process.
Following the Company being placed in voluntary administration, payment of Directors fees was
suspended with effect from 1 January 2007 and the practice of not paying fees continues as at the date of
this report.
The elements of emoluments have been determined on the basis of the cost to the Company.
Executive Officers are those directly accountable and responsible for the operational management
and strategic direction of the Company. Base salaries of Directors and Executive Officers (other
than options) are not related to the performance of the Company.
Table 3: Options granted as part of remuneration
At balance date, 6,000,000 options remain in force as follows:
Directors on 27 February 2008.
BMA Gold Limited is a company limited by shares that is incorporated and domiciled in Australia,
whose shares are publicly traded on the Australian Stock Exchange. BMA Gold Limited has prepared
a consolidated financial report incorporating the entities that it controlled during the financial year.
The nature of the operations and principal activities of the Group are described in the Directors'
Report.
The following non-audit services were provided by the entity's auditor, Ernst Young. The
directors are satisfied that the provision of non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. 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 the following amounts for the provision of non-
audit services:
There is currently no formal performance evaluation process of senior executives as there are
presently only two senior executives who are both Executive Directors and the activities of the
Company currently relate to one exploration project. No formal performance evaluation was
conducted during the year. For further detail please refer to the corporate governance statement
on page 17.
In relation to our audit of the financial report of BMA Gold Limited for the year ended 31
December 2007, to the best of my knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct.
Ernst Young
Paul Flynn
Partner
The Board has adopted Corporate Governance Policies and Procedures that provide a foundation for
good management and oversight, promotion of ethical and responsible decision making, integrity in
financial reporting, timely and balanced disclosure, respect for the rights of shareholders, management
of risk, promotion of performance and remuneration. The Corporate Governance Policy largely
conforms to the ASX Guidelines.
Features of the Corporate Governance regime of the Company and the departures from the ASX
Guidelines are discussed in the following sections.
The Board of Directors and its Committees
The Board of Directors is responsible for setting the strategic direction, establishing the policies and
overseeing the financial position of the Company, and for monitoring its business and affairs on behalf
of shareholders. The responsibility for the day to day operational and administration of the Company is
delegated by the Board to the Managing Director.
The Board is presently comprised of three members of whom one is the Non-Executive Chairman and
two are Executive Directors.
Mr Wall was the Non-Executive Chairman until 22 August 2007 when he was succeeded by Mr
O'Keeffe. Due to the small size of the Board and the current stage of development of the Company, the
Board as a whole deals with matters that would normally be delegated to committees.
There is no formal induction programmed for the Directors although the Company currently has one
core asset which is well known and understood by Directors.
With the exception of the Managing Director and the Executive Director Finance, Directors do not have
individual letters of appointment setting out their rights and obligations. However, all Directors have
considerable experience and corporate expectations are well understood.
There are no restrictions on the access of any Director to the Company Secretary or to any executive.
Ethical and Responsible Decision Making
Directors must disclose to the Board actual or potential conflicts of interest that may or might
reasonably be thought to exist between the interests of a Director and the interests of any other parties
in carrying out the activities of the Company.
A Director affected by a conflict of interest must, in accordance with the Corporations Act 2001, absent
himself or herself from discussions and/or voting on matters about which the conflict relates.
The Board has adopted a Code of Conduct which applies throughout the Company. The policy adopted
includes restrictions in trading in the Company's securities by potential insiders, including Directors.
The Share Trading Policy restricts the purchase and sale of Company securities by Directors and
employees to the two week period immediately following the release of the Company half-yearly and
annual results or at such other time deemed appropriate by the Chairman (or Secretary in the case of
employees). Dealing in Company securities is specifically prohibited in the two week period prior to the
market release of price sensitive information and for short term speculation.
Integrity in Financial Reporting
The Company has received the attestations recommended by the ASX Corporate Governance Council
from the Managing Director and the Executive Director Finance as to the Company's financial
condition prior to the board approving the accounts of the Company.
Due to the size and current stage of development of the Company, the board as a whole deals with
matters that would normally be conducted by an Audit Committee. However, the board specifically
undertakes a detailed review of:
The Company has written policies and procedures on information disclosure that focus on continuous
disclosure of information concerning the Company and its controlled entities that a reasonable person
would expect to materially affect the price of the Company's securities.
The Managing Director has been nominated as the person responsible for communications with the
Australian Stock Exchange (ASX). This role includes responsibility for ensuring compliance with the
continuous disclosure requirements of the ASX listing rules and overseeing and coordinating
information disclosure to the ASX, analysts, brokers, shareholders, the media and the public. There are
internal checking arrangements to ensure that all disclosures are accurate.
All information disclosed to the ASX is posted on the Company's website as soon as it is disclosed to
the ASX. Furthermore, when analysts are briefed on aspects of the Group's operations, the material to
be used in the presentation is released to the ASX and posted on the Company's website.
Remuneration Policy
Remuneration of non-executive directors is by way of director's fees from an aggregate annual pool
approved at a general meeting by shareholders. Currently the amount of the pool is capped at $250,000.
The Company does not have any arrangements to pay retirement benefits to Non-Executive Directors.
Remuneration for executives is structured at a level that is market competitive and consistent with best
industry practice as well as supporting the interests of shareholders. The Company is not yet of a size
that can provide the career and development opportunities that are available in larger resource
companies yet it must attract particularly able people.
By remunerating senior executives through performance and long-term incentive plans, in addition to
fixed remuneration, the Company aims to align the interests of senior executives with those of
shareholders and increase the Company's performance.
Interest of Stakeholders
The Company will be managed in a way which recognizes obligations to a wide range of stakeholders
other than its employees, contractors and shareholders. The Company will strive to earn and retain the
respect of the communities in which it operates.
Principles of Corporate Governance
The Table below provides a statement disclosing the extent to which the Company has not followed the
Corporate Governance Principles and Recommendations (2
The financial report of BMA Gold Limited (the Company) for the year ended 31 December 2007 was authorised
for issue in accordance with a resolution of the directors on 27 February 2008.
BMA Gold Limited is a company limited by shares that is incorporated and domiciled in Australia, whose shares
are publicly traded on the Australian Stock Exchange. BMA Gold Limited has prepared a consolidated financial
report incorporating the entities that it controlled during the financial year.
The nature of the operations and principal activities of the Group are described in the Director's Report.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (AIFRS). These financial reports are also in compliance with
International Financial Reporting Standards (IFRS).
(b) Adoption of new accounting standards and interpretations
The Group has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which
became applicable on 1 January 2007. The adoption of this standard has only affected the disclosure in these
financial statements. There has been no affect on profit and loss or the financial position of the entity.
The Group has adopted AASB 6 Exploration for and Evaluation of Mineral Resources and all consequential
amendments which became applicable on 1 July 2007. The adoption of this standard has only affected disclosure
in these financial statements. There has been no affect on profit and loss or the financial position of the entity.
Australian Accounting Standards that have recently been issued but are not yet effective have not been adopted by
the Group for the annual reporting period ending 31 December 2007. Those with material impact are listed below,
and all others are considered to have immaterial impact.
Basis of Preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also
been prepared on a historical cost basis.
The financial report is presented in Australian dollars.
(d) Basis of Consolidation
The consolidated financial statements are those of the economic entity, comprising BMA Gold Limited (the parent
company) and its subsidiaries as at 31 December each year (the Group).
Subsidiaries are fully consolidated from the date the parent company obtains control until such time as control
ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for
the part of the reporting period during which the parent company has control.
Subsidiary acquisitions are accounted for using the purchase method of accounting. The purchase method of
accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the
liabilities and contingent liabilities assumed at the date of acquisition.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company using
consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that
may exist.
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of
future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of certain assets and liabilities within the next annual reporting period are:
Impairment of goodwill and intangibles with indefinite useful lives.
The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an
annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the
goodwill and intangibles with indefinite useful lives are allocated.
Share-based payment transactions
The Group 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 using the Black-Scholes
model. The value of equity settled transactions is recognised over the period in which performance and/or service
conditions are fulfilled (the vesting period).
The Group measures the cost of cash-settled share-based payments at fair value at the grant date and all
Black-Scholes formula taking into account the terms and
conditions upon which the instruments were granted. During the vesting period, the liability recognised at each
reporting date is the fair value of the award at that date proportionate to the expired portion of the vesting period.
Once vested the liability is recognised as the full fair value at the reporting date.
Remaining mine lives
In estimating the remaining life of the mine at each mine property for the purpose of amortisation and depreciation
calculations, due regard is given not only to the volume of remaining economically recoverable reserves and
resources but also to limitations which could arise from the potential for changes in technology, demand, product
substitution and other issues that are inherently difficult to estimate over a lengthy time frame.
Current tax assets and liabilities 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 liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised,
except:
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows
arising from investing and financing activities which is recoverable from, or payable to, the taxation authority are
classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such
cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is
incurred.
Buildings are measured at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated on a straight line basis over the useful life of the assets as follows:
Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date, with the
recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may
be impaired.
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For 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.
Impairment exists when the carrying value of an asset of cash-generating units exceeds its estimated recoverable
amount. The asset or cash-generating unit is then written down to its recoverable amount.
For buildings, plant and equipment, impairment losses are recognised in the income statement in the other
expenses line item.
Any gain or loss arising on derecognition 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.
(i) Impairment of Assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the
asset's recoverable amount. An asset's recoverable amount is the higher of its fair value less costs to sell and its
value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated
to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to
which it belongs. When the carrying amount of an asset of cash-generating unit exceeds it recoverable amount, the
asset or cash-generating unit is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discounted rate that reflects current market assessments of the time value of money and the risks specific to the
asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent
with the function of the impaired asset.
As assessment is also made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates
used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case
the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised
for the asset in prior years. Such reversal is recognised in profit or loss. After such a reversal the depreciation
charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
(j) Revenue Recognition
Sale of goods:
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer
and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the
goods to the customer, being when the gold leaves the Mill.
(k) Exploration, Evaluation, Development and Restoration Costs
The Company has applied AASB 6 from 1 January 2007.
Costs Carried Forward
Costs arising from exploration and evaluation activities relating to an area of interest are carried forward provided
such costs are expected to be recouped through successful development, or by sale, or where exploration and
evaluation activities have not, at balance date, reached a stage to allow a reasonable assessment regarding the
existence of economically recoverable reserves.
Costs carried forward in respect of an area of interest that is abandoned are written off in the year in which the
decision to abandon is made.
Amortisation
Costs on productive areas are amortised over the life of the area of interest to which such costs relate on the
production output basis.
Exploration Evaluation
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 portion of related overhead
expenditure, but does not include general overheads or administrative expenditure not having a specific
connection with a particular area of interest. Exploration and evaluation costs in relation to separate areas of
interest for which rights of tenure are current are brought to account in the year in which they are incurred and
carried forward provided that:
Accumulated costs in respect of areas of interest are written off in the Income Statement when the above criteria
do not apply or when the directors assess that the carrying value may exceed the recoverable amount. The costs of
productive areas are amortised over the life of the area of interest to which such costs relate on the production
output basis.
Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect
of the area of interest is aggregated within costs of development.
Development
Development expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest
in which economically recoverable reserves have been identified to the satisfaction of the directors. Such
expenditure comprises net direct costs and, in the same manner as for exploration and evaluation expenditure.
All expenditure incurred prior to the commencement of commercial levels of production from each development
property is carried forward to the extent to which recoupment out of revenue to be derived from the sale of
production from the relevant development property, or from the sale of that property, is reasonably assured.
Exploration, Evaluation, Development and Restoration Costs (continued)
Restoration
Provisions for restoration costs 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 settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected cash
flows at a pre-tax rate that reflects current market assessments of the time, value of money and, where appropriate,
the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Remaining Mine Lives
In estimating the remaining life of the mine at each mine property for the purpose of amortisation and depreciation
calculations, due regard is given not only to the volume of remaining economically recoverable reserves and
resources but also to limitations which could arise from the potential for changes in technology, demand, product
substitution and other issues that are inherently difficult to estimate over a lengthy time frame.
(m) Cash and Cash Equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
Bank overdrafts are carried at the principal amount. Interest is charged as an expense as it accrues.
(n) 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 any uncollectible amounts.
An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to
collect the debts. Bad debts are written off when identified.
Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as
income on an accrual basis.
All investments are recognised at cost, being the fair value of the consideration given and including acquisition
charges associated with the investment.
(q) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the
business combination over the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities
and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is
reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Group's cash-generating units, or groups of cash-generating units, that are expected to
benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are
assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-
generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group
of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms
part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured, based
on the relative values of the operation disposed of and the portion of the cash-generation unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
Trade payables and other payables are carried at amortised costs and represent liabilities 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.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised
as an expense on an accrual basis.
(s) Interest-bearing Liabilities
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 using
the effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are de-recognised.
(t) Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
Basic EPS is calculated as net loss attributable to members of the parent, adjusted to exclude costs of servicing
equity (other than dividends) divided by the weighted average number of ordinary shares, adjusted for any bonus
element.
Diluted EPS is calculated as net loss attributable to members of the parent, adjusted for:
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle 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 buy only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(x) Employee Leave Benefits
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the reporting date are recognised in other payables in respect of
employees' services up to the reporting date. They are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are
measured at the rates paid or payable.
The liability for long service leave is recognised in the provision for employee benefits and measured as the
present value of expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures, and periods of service. Expected future payments are discounted using
market yields at the reporting date on national government bonds with terms to maturity and currencies that
match, as closely as possible, the estimated future cash outflows.
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor
retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is
recognised to the extent of the Group's continuing involvement in the asset. Continuing involvement that takes the
form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset
and the maximum amount of consideration received that the Group could be required to repay.
When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option
or similar provision) on the transferred asset, the extent of the Group's continuing involvement is the amount of
the transferred asset that the Group may repurchase, except that in the case of a written put option (including a
cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group's continuing
involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognised in profit or loss.
Equity settled transactions
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment
transactions ('equity-settled transactions').
The Group currently has in place an Employee Option Plan (EOP), which provides benefits to senior executives and
employees.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at
which they are granted. The fair value is determined by using the Black-Scholes model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions
linked to the price of the shares of BMA Gold Limited ('market conditions').
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (`vesting date').
Where an equity-settled 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 dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share.
Going concern basis
The financial report has been prepared on a going concern basis. As at the date of this financial report, the
directors conclude that the consolidated entity is a going concern and able to pay its debts as they fall due and
realise their assets in the ordinary course of business.
The Company is currently undertaking an exploration programme funded from existing cash reserves. Additional
new funding may be required at some time in the future to fund any extension of exploration programme and
company overheads. Accordingly, the future ability of the consolidated entity to pay its debts as and when they
fall due may be dependent on the injection of additional financing.
On 29 January 2007, the Board of Directors announced the suspension of Twin Hills mining and milling operations,
subsequent to an ASX announcement on 16 January 2007 announcing a material downgrade in resources. The
Company proposed further exploration of the 309 and Lone Sister deposits and other prospective regional targets to
delineate additional resources to justify a treatment plant at the mine site. It was intended that the proposed exploration
be funded from cash generated from the sale of surplus mining assets and the gold treatment plant, be supplemented
with the issue of new equity capital. The Company had sought temporary accommodation from its bankers while the
recapitalisation was being undertaken. A Trading Halt in the Companies securities had been put in place pending
consideration of a temporary facility by the Company banker. The bank subsequently declared that the loan facility
was in default and exercised its right to call the Company's cash reserves.
As a consequence of the Company's banker withdrawing its support for the Company, Peter Geroff and Peter
McCluskey of Ferrier Hodgson were appointed Voluntary Administrator of the Company and Twin Hills Operations
Pty Limited on 30 January 2007.
Accessible economic ore was extracted and processed generating cash to partially fund the mine and mill closures. The
mine was decommissioned in March 2007 and the gold treatment plant was subsequently placed on care and
maintenance. Surplus mining assets were sold for $4.2m including the major items of mining equipment and the
Rishton Treatment Plant for $3.5m which was completed on 5 July 2007.
Financial performance of curtailed operations and assets held for sale
The Company has tax losses in Australia of $35,129,124 (2006: $25,947,216) that are available for offset against
future profits of the company.
Tax consolidation
BMA Gold Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group with
effect from 1 July 2003. BMA Gold Limited is the head entity of the tax consolidated group. Members of the group
have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries
on a pro-rata basis. In addition the agreement provides for the allocation of income tax liabilities between the entities
should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement
provides for the allocation of current taxes to members of the tax consolidated group in accordance with their
accounting profit for the period, while deferred taxes are allocated to members of the tax consolidated group in
accordance with the principles of AASB 112 `Income Taxes'. Allocations under the tax funding agreement are made at
the end of each quarter. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease
in the subsidiaries' inter company accounts with the tax consolidated group head company, BMA Gold Limited.
Because under UIG 1052 `Tax Consolidation Accounting' the allocation of current taxes to tax consolidated group
members on the basis of accounting profits is not an acceptable method of allocation given the group's circumstances,
the difference between the current tax amount that is allocated under the tax funding agreement and the amount that is
allocated under an acceptable method is recognised as a contribution/distribution of the subsidiaries' equity accounts.
The group has applied the group allocation approach in determining the appropriate amount of current taxes to allocate
to members of the tax consolidated group.
6 Dividends Paid and Proposed
During the financial year, no amount has been paid or declared by the economic entity by way of a dividend. The
balance of the Company's franking credit account at 31 December 2007 is nil (year ended 31 December 2006: nil).
Fair value and credit risk
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The
maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it Group
policy to transfer (on-sell) receivables to special purpose entities.
Goodwill was allocated in full against the Twin Hills Operation cash generating unit. The recoverable amount of the
cash generating unit to which the goodwill related was assessed based on fair value less costs to sell and found to be
less than the carrying value of the assets in the cash generating unit. As a result, it was decided to write off the full
amount of goodwill at 31 December 2006.
Restoration costs are expected when exploration, evaluation and development activities give rise to the need for
restoration. The costs include obligations relating to reclamation, waste site closure, plant closure and other costs
associated with the restoration of the site. These estimates of the restoration obligations are based on current
technology and legal requirements and future costs. Any changes in the estimates are adjusted on a prospective
basis. In determining the restoration obligations, the entity has assumed no significant changes will occur in the
relevant Federal and State legislation in relation to restoration of such mines in the future.
Royalties relate to the Indigenous Land Use Agreement (ILUA) and Plutonic Operations, which are discussed
further in Note 19.
Secured bank loan
The loan had been drawn down under an $8 million Cash Advance Facility and was secured by a fixed and
floating charge over Group assets.
A material downgrade in resources in January 2007 triggered an event of default on the facility and the bank
subsequently exercised its right to demand immediate repayment. Repayment was made in full during the period
using cash reserves supplemented with funds from asset sales.
The interest periods on advances were nominated by the Company at the time of drawing the funds and must have
been for periods of 30, 60, 90 or 180 days. Interest in arrears on the advance were be paid on the interest payment
date at the end of each interest period. The loan was repayable in full by 31 March 2008. The terms of the loan
included a provision that the lender may demand immediate repayment of the loan in the event of a materially
adverse change to the Company's financial position.
Fair value
Due to the circumstances of the loan default, the carrying value is assumed to approximate the fair value.
Ordinary fully paid shares have the right to receive dividends as declared and, in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and
amounts paid up on shares held. Ordinary fully paid shares entitle their holder to one vote, either in person or by proxy,
at a meeting of the Company.
At balance date there were 131,270,447 (2006: nil) listed options oustanding which entitles the option holder,
subject to the terms and conditions of the options, one ordinary fully paid share for each option held.
The exercise price is 2.5 cents, with no vesting period and they expire after 5 years on 12 Oct 2012.
Capital Management
When managing capital, management's objective is to ensure the entity continues as a going concern and maintain a
capital structure that ensures the lowest cost of capital available to the entity. As the market is constantly changing,
management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt. The group is not subject to any externally imposed capital requirements. Capital is
monitored through the gearing ratio (net debt/total capital). The gearing ratios are as follows:
Commitments and Contingencies
(i) Mining and Exploration Tenements
In order to maintain rights of tenure on mining and exploration tenements, the Company and the consolidated entity
are required to outlay certain annual expenditures. The expenditure commitment is estimated at $250,000 (2006:
$265,000). The expenditure commitments for the Queensland gold tenements have satisfied the expenditure
requirements. With the other tenements, the Company intends to either farm out, sell or relinquish the tenements. All
commitments relate to the next 12 months.
(ii) Termination Agreements
The economic entity has contingent liabilities in respect of termination benefits which may arise pursuant to service
agreements entered into with executives and employees who take part in the management of the economic entity.
The maximum amount of the contingent liability is dependent upon the circumstances in which the employment is
terminated. Accordingly no provision has been made in the accounts as no executive has been terminated. For details
of Executive employee contracts refer to Note 21.
(iii) Superannuation Plans
The Company contributes to staff superannuation plans at the rate as required by the Superannuation Guarantee
Legislation of 9%. These contributions are legally enforceable only where payable in terms of a ratified award
obligation or under the Superannuation Guarantee Legislation.
(iv) Indigenous Land Use Agreement Termination Agreements (ILUA)
By an agreement dated 24 May 2003 between Colin McLennan, James Gaston, Paul Butterworth, Thomas Brown,
Tyrone Tiers, Dorothy Hustler and Marie McLennan (Native Title Parties) and the Company, the Native Title Parties
have agreed to allow the grant of Mining Lease 70316 over and exploration and mining for gold and silver on EPM
8693 and EPM 4459 and part of EPMA 12012. The Company has obligations to inform its workers of the interests of
the Jangga people in the area the subject of the tenements, to provide work opportunities to the Jangga people, to
report activities to the Jangga people, to respect various sites and to pay financial consideration to the Jangga people.
The financial consideration comprises:
Each of the above amounts is to be adjusted for inflation.
Pursuant to its terms, the ILUA associated payments were suspended upon the cessation of mining activities effective
1 April 2007, but may be reactivated if mining were to recommence.
(v) Plutonic Operations Limited
Twin Hills Operations Pty Limited has granted Plutonic Operations Limited a call option to acquire a 68% interest in
any gold deposit other than Lone Sister or the 309 Deposit, containing a Mineral Resource of greater than 1 million
ounces of gold (classified and reported in accordance with the JORC Code), discovered within the Twin Hills mining
tenements for the consideration of 250% of amounts directly spent on exploration. The terms of the purchase entitles
Plutonic Operations Limited to receive a royalty at the rate of 2.5% of all fine gold produced from the tenement.
Share options have been granted as an incentive component in the remuneration arrangements for senior executives
and managers. The contractual life of each option granted is 3 to 5 years and the market price of the options is set at
the market price of the shares at the grant date. There are no cash settlement alternatives.
Share Options on issue to key management personnel and employees at 31 December 2007 are as follows:
Notes:
1. No options were exercised during the period.
2. The option entitles the holder to one ordinary share per option, subject to valid exercise by the expiry date.
3. Various time based vesting conditions apply to the options ranging from 12 months to 2 years.
4. The exercise price of options marked ** was to be determined based on a market share price over the last 5
The fair value of the options issued is measured at the grant date using the Black-Scholes option pricing model taking
into account the terms and conditions on which the options were granted. The expected volatility rate used in
calculating the option values was between 68% and 104% in 2006 (2006: 68% and 104%). The risk free rate used in
calculating the option values ranged from 5.0% and 5.9% in both 2006 2007. The valuation is recognised in the
income statement over the expected vesting periods as share based payments expense and is disclosed at Note 4(v).
The Board of Directors is responsible for determining and reviewing compensation arrangements for the executive
team.
Key Management Personnel Remuneration
The Company is committed to remunerating its key personnel in a manner that is market competitive and consistent
with best practice as well as supporting the interests of shareholders. The Company is not yet of a size that can provide
the career and development opportunities that are available in larger resource companies yet it must attract particularly
able people. The key mechanisms for this are performance bonuses and option plan participation. Consequently, under
the remuneration policy, the remuneration of staff may be comprised of the following:
By remunerating through performance and long-term incentive plans in addition to their fixed remuneration, the
Company aims to align the interests of staff with those of shareholders and increase Company performance. Refer to
below for the details of the amount of remuneration, including both monetary and non-monetary components, for each
of the five highest-paid key management personnel during the year (discounting accumulated entitlements).
Equity transactions
For details on the valuation of the options, including models and assumptions used, please refer to note 20. There were
no alterations to the terms and conditions of options granted as remuneration since their grant date. The elements of
emoluments have been determined on the basis of the cost to the Company. Key management personnel are those
directly accountable and responsible for the operational management and strategic direction of the Company.
Emoluments of key management personnel (other than options) are not related to the performance of the Company.
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
Related parties of BMA Gold Limited fall into the following categories:
(i) Directors and Specified Executives
Rent and computer services of $204,234 (2006:$475,285) were provided by CBH resources, of which R E Besley and
J A Wall are both directors. Rates were based on arms length transactions. Other disclosures relating to Directors and
specified executives are set out in Note 21.
(ii) Ultimate Parent
BMA Gold Limited is the ultimate parent entity.
(iii) Wholly-owned Group
The wholly-owned group consists of BMA Gold Limited, the ultimate parent entity, and those wholly owned
controlled entities as set out in Not
Related: Annual Report to shareholders
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