Professional Documents
Culture Documents
Altona Energy holds, through its wholly owned subsidiary Arckaringa Energy Pty Ltd (‘Arckaringa
Energy’), a 49% interest in three exploration licences covering 2,500 sq. km in the northern portion of
the Arckaringa Basin in South Australia and including three coal deposits — Westfield (EL 4511),
Wintinna (EL 4512) and Murloocoppie (EL 4513), which are estimated to contain more than 7.8 billion
tonnes of coal (Non-JORC). All three deposits lie close to the Adelaide to Darwin railroad and the
Stuart Highway.
Arckaringa Energy entered into the Arckaringa Unincorporated Evaluation Joint Venture (‘the JV’)
with CNOOC New Energy International (Australia) Pty Ltd (‘CNOOC-NEIA’) a subsidiary of CNOOC,
one of China’s largest national oil companies, whereby a 51% interest in the ELs was transferred to
CNOOC-NEIA for funding the Bankable Feasibility Study (‘BFS’).
Our Business
2 Coal to Liquid (‘CTL’)
3 Coal Deposits
4 Chairman’s Statement
6 Operations Report
Our Governance
8 Directors’ Report
11 Directors’ Responsibilities
12 Independent Auditors’ Report
Our Financials
Australia 13 Consolidated Statement of
Comprehensive Income
14 Statements of Financial Position
15 Statements of Cash Flows
16 Statements of Changes in Equity
17 Notes to the Consolidated Financial
Statements
AREA OF FOCUS
These plants, like those proposed for the Arckaringa Project, involve two major
stages — a gasification stage to produce synthetic gas or ‘Syngas’ rich in hydrogen
and carbon, and a liquefaction stage, where the Syngas is reacted over a catalyst — A True ‘Polygen’ Project
the Fischer-Tropsch process — to produce high quality, ultra clean synthetic fuels and »» Syngas is the intermediate feedstock from
chemical feedstocks. which a wide range of high value products
can be generated — not just clean diesel
and jet fuels, but also industrial products
such as synthetic natural gas, methanol,
fertilisers and waxes.
»» The clean up and purification processes:
– leave a harmless glassy slag usable in
construction
– produce sulphur for industrial sales
– allow Carbon Dioxide (CO2) to be
stripped from the Syngas ready for
sequestration or sale.
»» Water released from the coal during
conversion to Syngas can be condensed
into steam and then combined with tail
Pictured: Pre-feasibility Plant Design based on: gases from the Fischer-Tropsch units
to feed steam and combined cycle gas
» Coal Gasification
turbines and generate power for the
» Fischer-Tropsch Synthesis
Project and surplus electricity for sale.
» Combined Cycle Gas Turbine power generation
Benefits of the Project
»» Domestic fuel supply will replace imports
and enhance energy security, whilst
power generation will help meet South
Australia’s growing electricity needs.
»» CTL fuels are ultra clean to use — they
contain zero sulphur, reduce gaseous and
particulate emissions, increase engine
LOW efficiency and lower maintenance costs.
FEED
VALUE Turned into »» CTL is a prime example of clean coal
STOCK
COAL technology — the associated combined
cycle units produce negligible SOx,
significantly less NOx.
»» All the carbon dioxide contained in the
synthesised gas entering the FT process
is captured for sequestration. Additionally
he Arckaringa Project will convert
T
To Produce the carbon dioxide contained in the fuel
low-value coal into feedstock to produce
gas entering the power plant facilities can
high-value hydrocarbons for fuel
production (such as clean burning diesel) also be removed using the same facility
and low-cost power generation thus minimising CO2 emissions and also
exposure to carbon tax payments.
»» Carbon capture and storage offers
the potential to reduce the overall
greenhouse gas emissions from CTL to
LOW COST HIGH below the ‘well to wheel’ level of fuels
delivered from crude oil, and also reduce
POWER VALUE CO2 emissions on power generation
GENERATION HYDROCARBONS from both conventional coal fired and
natural gas power plants.
Coal Quality
The coal resources of the Arckaringa Basin
Wintinna Typical Raw Coal Quality
Our Business
were extensively explored in the 1980s and
Quality Parameter As received several feasibility studies were carried out
for the Wintinna deposit, as a fuel source for
Total Moisture 36.6%
potential offsite base load power stations
Raw Ash 8.2% and private industrial projects. In 1984, a
Volatile Matter 23.6% bankable feasibility study was submitted to
the South Australia Government. However,
Total Sulphur 1.119%
like other projects for which Wintinna was a
Chlorine 0.03% potential source of supply, the power station
Specific Energy 17.1 (MJ/kg)% was never built. Approximately 24,000
Relative Density 1.25% (g/cc) metres of drilling in 105 boreholes at 93
sites were completed in past exploration
Source: A&B Mylec – “Wintinna Resource Coal Quality Review”
programs to define the current deposit.
Approximately 30% of the boreholes were
Coal Resources (includes non-JORC)
cored at either HQ or larger diameter and
MILLION TONNES all boreholes were geophysically logged.
A comprehensive set of hydro-geological,
Deposit Measured* Indicated* Inferred* Total
geo-technical, mining and environmental
Wintinna 1,150 750 2,000 3,900 studies was also completed for the Wintinna
Westfield 100 200 500 800 deposit at this time.
MILLION TONNES
Pictured: Coal seam from Wintinna. Above: The Arckaringa Project Location
www.altonaenergy.com Stockcode:
Stockcode:ANR
ANR 3
CHAIRMAN’S STATEMENT
Our Business
company Rentech, Inc (“Rentech”). Rentech strengthened with the appointment in and power source for South Australia at
has proprietary technologies for the Fischer- January of Peter Fagiano as Executive the Arckaringa Project continues to be
Tropsch Process and the gasification Director in charge of Project Technology. reinforced by the work undertaken by the
of biomass, enabling the production of Peter has worked closely with Altona on BFS, and by market and energy security
transportation fuels such as low sulphur the Arckaringa Project pre-feasibility study issues. Global economic conditions remain
diesel and aviation fuels. Altona and in his role with Jacobs Engineering UK challenging for all but we have secured
Rentech will work together on the evaluation Limited. His decision to join Altona in a full development partners for Arckaringa and
of coal and biomass gasification projects time executive role was another vote of strategic shareholders from the UK and
in Australia and China for the application of confidence in the future of the Company. Hong Kong. South Australia’s economy
these technologies. continues to grow and the progression of
Financial Review the Arckaringa project means that the State
In addition, Altona established a relationship On 20 June 2010 we placed 10,204,081 will have a strategic fuel and power source
with Icelandic based clean energy new Ordinary Shares with the Company’s to support major new resources projects
company CRI, holder of exciting proprietary largest shareholder, Tongjiang, at 9.80 coming on line such as the Olympic Dam
technology for the production of fuel pence each to raise gross proceeds of £1.0 expansion recently announced by BHP
grade renewable methanol from CO2 and million to provide additional working capital. Billiton.
hydrogen. CRI has recently commissioned The financial loss of the Group for the 12
a commercial fuel grade renewable months ended 30 June 2011 of £1,593,000 CNOOC’s independent studies conducted
methanol plant in Iceland based on CO2 (2010: £2,442,000) was in line with throughout the year have confirmed that
sourced from geothermal wells. Under the expectations and includes a share based the quality of the Arckaringa coal is highly
relationship agreement, Altona and CRI will payments expense of £191,000 suitable for conversion to Syngas, using
work together to evaluate the application existing tried and tested commercial
of CRI’s technology at the Arckaringa technologies. South Australia already has
CTL Project utilising the CO2 captured for to import all its diesel fuel needs and is
sequestration with the hydrogen produced forecast to require an additional 1,000MW
in the synthesis gas in the Fischer-Tropsch of base load power over the next 10 years,
Process production of diesel. The concept therefore products from the Arckaringa
proposed to be evaluated by Altona and CRI project will be highly marketable given this
is for a scalable renewable methanol plant growing domestic and worldwide energy
at Arckaringa, producing 100 million litres demand.
per year of renewable methanol that could
be increased in modular form to meet future As with any world scale resource and
market demand. Above: Altona Directors with CNOOC-NEIA
energy project, the BFS is a major
representatives. undertaking, but with each step in the work
In addition, the Company signed an programme, the Company further derisks
agreement in May 2011 with its major the Project and moves steadily closer to
shareholder, Tongjiang International Energy (2010: £1,099,000), as well as the benefit unlocking the vast potential and value in one
Co. Ltd (“Tongjiang”), to assess coal and during the period of a £104,000 tax credit of the world’s largest undeveloped energy
biomass energy projects in China. Tongjiang (2010: £156,000) in respect of research and banks.
has been a key partner in the Company’s development costs available to the Group.
development in funding and by bringing in With this in mind I would like to thank all
CNOOC-NEI as JV development partner to As at 30 June 2011, the Group had cash those involved in the Company for their help
the Arckaringa Project. This agreement aims of £1,563,000. Under the terms of the JV, as well as shareholders for their support,
to leverage Tongjiang’s established network CNOOC-NEIA, will wholly fund the BFS for and I look forward to updating you all on our
in the PRC, Altona’s expertise in energy the Arckaringa Project up to the budget progress throughout the year.
assets and the Company’s established of A$40million, however the Group will
London listing. require further funds to meet its operational Christopher Lambert
commitments over the next twelve months, Chairman
Since signing the agreement with Tongjiang, which the Directors are confident of 9 November 2011
we have been actively working on identifying positively procuring.
commercial opportunities, and the recently
announced appointment of Michael Zheng,
Tongjiang’s representative on the Board, as
Deputy Chairman reflects the importance
of Michael’s contribution to both the
Arckaringa project and in the development
of business in China.
The past year has proved to be was appointed in the fourth quarter of 2010
something of a watershed for Altona, under a contract signed with CNOOC-
as the Company truly shifted onto a NEIA and approved by Altona. A technical
project development footing. Not only team from CNACG visited South Australia
did the Bankable Feasibility Study in January 2011 and during this time held
work programme commence for a series of technical data review sessions
Altona’s flagship Arckaringa CTL and with Altona and met local hydrogeological
Power Project, but the Company also and other consultants, including those
established a number of operating employed during the Altona Pre Feasibility
relationships with clean energy Study (“PFS”) work. The team also visited
technology providers to capitalise on the site and confirmed the parameters for
the technical knowledge gained from the existing geological database and the
the Arckaringa Project and to open up physical conditions governing the location
complementary business opportunities. of the Wintinna mine and supporting
infrastructure, including the transport
Through the Company’s Joint Venture corridor options to link into the nearby
with CNOOC-NEIA, the Arckaringa Project national rail and road network.
BFS made a solid start. CNOOC-NEIA is
concentrating on project fundamentals CNACG completed comprehensive reports
and reducing risk. For example, our to Chinese standards in April 2011, covering
JV partner has, with the assistance of coal geology and coal quality, geotechnical
Altona and a range of first class technical characteristics of the proposed mining
advisers in China and Australia, made area and the hydrogeology of the Wintinna
it a priority to reconfirm and expand the coal deposit (EL4512). These reports were
geological database and coal conversion subsequently assessed by applicable
potential of the Wintinna coal resource authorities in China, whose Evaluation
to meet Chinese, as well as international, Report endorsed the quality and extent
standards. This approach ensures a sound of the coal deposit which underpins the
foundation for successful project design Arckaringa Project. The CNACG reports
and implementation and for future project have also served to underpin the design of a
approvals in China and Australia. The field drilling programme, described in more
Directors’ believe the Chinese geological detail below.
and open cut mine design standards are
extremely rigorous and meeting them makes Altona successfully applied for a two year
a mining project eminently bankable. renewal of the Arckaringa exploration
licences (“ELs”), on behalf of the Arckaringa
Important early elements of the BFS work Joint Venture partners, for the period until
programme agreed by the JV partners 6 June 2013. The renewal of ELs in South
included: Australia is typically for a period of one
»» Detailed review of coal deposit geology year within a maximum five year timeframe,
and consideration of supplemental subject to meeting minimum expenditure
These positive developments have enabled
drilling; commitments and other terms of the
CNOOC-NEIA to assemble a multidiscipline
»» Groundwater investigation and Licences. In this instance, however, the
project team and relocate staff from China
verification; Minister for Mineral Resources granted
to a new office in Adelaide. Together with
the renewals for two years in recognition
»» Groundwater management research and Arckaringa Energy personnel, they form the
of the extensive scope of the BFS work
design; South Australian based JV Operating Team.
programme. As submitted in Altona’s
»» Environmental baseline studies; Victor Li is the General Manager of CNOOC-
renewal application, the work during the first
»» Open cut coal mining methodology NEIA and is the Project Leader and Head of
year of the renewal period will comfortably
options; and the Operating Team.
exceed the combined minimum annual
»» Product market research. expenditure commitment over the three
ELs of A$690,000. The South Australian
The first two of these elements have been Government also took into account that
completed, largely through the work of the JV Agreement includes a sole funding
the Geological Research Institute of the commitment by CNOOC-NEIA for the BFS
China National Administration for Coal work programme of A$40 million, the bulk
Geology (“CNACG”), whilst work on the of which is scheduled to be spent over the
remaining elements is continuing. CNACG next two years.
Our Business
in conjunction with leading Chinese
consultants, are carrying out technical and
“The BFS is a major undertaking but with each step
economic studies on the options for coal in the work programme the Company further derisks
conversion (including CTL and power) and
on a range of project configuration issues, the Project and moves steadily closer to unlocking the
including:
vast potential and value in one of the world’s largest
»» The feasibility of upgrading a proportion undeveloped energy banks”
of the mine’s total coal output of up to
15 million tonnes per annum, with part of
the upgraded product to be fed into the Applications for an Exploration Works The focus of the BFS continues to be the
CTL plant in order to reduce its capital Approval and other required permits have Project Base Case, covering:
cost, and part to be potentially exported been submitted to the relevant agencies
to China. of the South Australian Government and »» An open cut mine producing 10 to 15
»» The integration and optimisation of mine are expected to be received by the end of million tonnes per annum at Wintinna
output, coal upgrading and the CTL 2011, with field work commencing in 2012 »» A CTL plant producing 10 million barrels
process, will form the basis of design and lasting up to six months. Consultation of distillate per annum, primarily zero
and underpin the economic model for with local stakeholders is already taking sulphur diesel fuel, alongside by-products
the mine development and CTL and place ahead of the field work as part of an including naptha, sulphur and water; and
power plant. ongoing community relations programme »» An integrated gasification combined
conducted over the five years since Altona’s cycle plant producing 560 MW of power
Stemming from the CNACG and other entry into the region. available for export.
reports, the JV Operating Team has
commenced detailed preparations for a With the BFS work programme now well However, the strength of the Project
drilling programme focussed on EL 4512 underway, Altona has continued to highlight rationale suggests there is significant
(Wintinna) area. The programme will feed the Arckaringa Project and its potential potential to create a range of clean energy
further data into the coal conversion studies impact on South Australia’s energy outlook projects based on the Arckaringa coal asset
and will include: in presentations to State and regional and on the commercial technologies it will
forums throughout the year. Backed by the employ. In that regard, Altona has looked to
»» Close spaced coal and geotechnical involvement of CNOOC, and the confidence develop relationships with key technology
boreholes in the proposed initial mine in the future of the Project that this signals, providers to enhance the Project and to
development area, for the purposes of the Company believes that the rationale for create other business opportunities for
firming up mine design parameters and the Project remains as strong as ever: the Company in the clean energy sphere.
upgrading the JORC resource estimates Details of recent agreements with Rentech,
»» Extraction of bulk samples of coal for »» The Arckaringa coal asset is capable of CRI and Tongjiang were covered in the
testing in China and Australia, with supporting large scale, very long term Chairman’s Statement above.
the main purpose of finalising coal development
feedstock characteristics for a range »» The coal quality is suitable for conversion The Company’s clean energy technology
of coal conversion options (including to syngas and derivative products initiatives, plus the progress of the BFS work
gasification, coal drying, briquetting etc) using existing commercial technologies, programme, promise another productive
»» Detailed hydrogeological testing to refine including high value ultra clean fuels and year ahead. As is the case with major
the existing hydrogeological model and chemical feedstocks, plus low cost and resources projects, a lot of the BFS work is
lay the basis for the mine dewatering and low emission power not only fundamental and detailed but also
groundwater management plan. »» South Australia faces a shortage of subject to review and reworking, making
fuel, base load power and water, both it difficult to be precise about completion
generally and especially for the growing timings. But with the continuing funding
mining sector commitment of CNOOC-NEIA, the work
»» With CNOOC-NEIA as our JV partner, remains squarely aimed at underpinning the
the project can also realistically target eventual construction of a significant new
coal and liquids exports to China and energy and fuels source in South Australia
other Asian destinations. and one of the most exciting resource
projects in the country.
Chris Schrape
Managing Director
9 November 2011
The Directors are pleased to present their Pursuant to the JV, it has been agreed that Directors and directors’ interests
report and the audited financial statements CNOOC-NEIA will manage and operate the The Directors of the Group and the
of the Group and the Company for the year BFS work programme initially utilising its Company during the period were:
ended 30 June 2011. in-house technical resources, augmented by
leading specialised consultants and actively Christopher Walter Lambert, Executive
Company formation assisted by the Altona team. The first stage Chairman
Altona Energy Plc is a publicly listed of the BFS has a budget of A$12 million, Mr Lambert’s financial background is
company incorporated and domiciled in after which the second stage, which has an predominantly commodity based in the
England & Wales. The Company’s ordinary A$28 million budget, will commence. City of London. Mr Lambert headed up
shares are traded on the Alternative the London and global trading operations
Investment Market (‘AIM’) operated by the The approved first stage BFS work for Elders Finance Group, The Rural and
London Stock Exchange. programme includes: Industries Bank of Western Australia,
Barclays Bank and Prudential Securities
Principal activity »» detailed review of coal deposit geology (USA) London. During his time at these
The principal activity of the Group is and consideration of supplemental companies, he was responsible for global
the evaluation of the development of an drilling; dealing operations in the major financial
integrated CTL plant and co-generation »» groundwater investigation and centres around the world, along with the
power facility, supported by an open- verification; structuring of corporate and project finance
cut coal mine at its Arckaringa Project in transactions for governments, central banks,
»» groundwater management research and
South Australia. The developments during industrial companies and mining houses. Mr
design;
the period are detailed in the Chairman’s Lambert is a Director of ASX listed PepinNini
»» environmental baseline studies;
Statement and Operations Report. Minerals Limited.
»» open cut coal mining methodology
Business review and future options; and Christopher John Schrape – Managing
developments »» product market research Director
A full review of the Group’s activities during Mr Schrape is a graduate of the University of
the year, recent events and expected future The Group cash at 30 June 2011 was Melbourne – B.A (Economics). He has more
developments is contained within the £1,563,000 (2010: £2,427,000). than 30 years experience in the resource
Chairman’s Statement on pages 3 to 5 and and mining industries, including Chief
in the Operations Report on pages 6 to 9. Results and dividends Executive Officer of Griffin Coal in Western
The loss of the Group after taxation Australia and 20 years with Rio Tinto in a
Principal risks and uncertainties amounted to £1,593,000 (2010: variety of senior management and marketing
The principal risks and uncertainties for the £2,442,000), which included a share roles in Australia and overseas, notably as
Group include the technical, economic and based payments expense of £191,000 Marketing Manager with Indonesia’s largest
regulatory outcome of the BFS, and are (2010: £1,099,000). The Directors do not coal operation (PT Kaltim Prima Coal) for 6
detailed in the Chairman’s Statement and recommend payment of a dividend (2010: years from project start-up in 1991. Before
Operations Report. £Nil). joining Altona Energy, Mr Schrape was
engaged as a Marketing Adviser for several
Key performance indicators Financial instruments prospective coal and power projects in Asia.
The Group’s principal focus is the evaluation Note 2 of the financial statements details
of the development of an integrated CTL the risk factors affecting the Group and Mr Schrape became a consultant and
plant and co-generation power facility, summarises the Group’s policies for adviser to Altona October 2005 and
supported by an open-cut coal mine at its mitigating such risks through holding and joined the Board in July 2006. He was
Arckaringa Project in South Australia. issuing financial instruments. These policies subsequently appointed Managing Director
have been followed during the current and in August 2006, with principal operational
Other key performance indicators the Group prior year. responsibility for the development of the
monitor on a regular basis are; Arckaringa Coal to Liquids (CTL) and Power
Project in South Australia.
»» Cash management – sufficient to meet
its commitments
»» Minimum spent commitments/licence
and environmental compliance
Our Governance
Mr Samaha holds Bachelor of Commerce Mr Sutherland joined the Board of Altona Altona in January 2011. He was previously
and Bachelor of Economics degrees. He is Energy in November 2006. He was the for 12 years Operations Director of
an Associate of the Institute of Chartered Chief Executive Officer of and Chief Industry Process & Technology Division for Jacobs
Accountants of Australia and an Associate of Advocate for the South Australian Chamber Engineering UK Limited (‘Jacobs’), here he
the Financial Services Institute of Australasia. of Mines and Energy (SACOME) from led the techno economic studies in respect
Mr Samaha has over 18 years experience in February 2001 until January 2007. SACOME of Altona Energy’s Coal to liquids project for
providing accounting and corporate advice in is the industry association for companies the Arckaringa Coal asset in South Australia.
a diverse range of industry sectors, including with business interests in the Resources
resource development. Mr Samaha is a Non- Industry in South Australia. Prior to his Prior to that he spent 12 years in senior
executive director of AIM listed Equatorial employment with SACOME, Mr Sutherland management roles at ABB Group, where
Palm Oil Plc. had extensive executive management he was responsible for leadership of
experience with local, state and federal their upstream oil and gas engineering
Zheng (Michael) Qiang – Non-executive government agencies. projects. He has during his 45 year career
Deputy Chairman in the hydrocarbon and minerals sector
Mr Zheng began his career as an economist Mr. Sutherland is well known in government, carried out major projects for BP, Chevron,
at the China Economic Commission before industry and media circles and is a graduate Petrobras, Conoco Phillips, Shell, Statoil
moving to the China Rare Earth Office of The in business management from the South and Total amongst other international
State Council Rare Earth Leading Group of Australian Institute of Technology and the energy companies in Australasia, China,
the State Planning Commission, where he University of South Australia. He is a Fellow Europe, India, the Middle East, North Africa,
was in charge of rare earth production. He of the Australian Institute of Management North America and Russia. Mr Fagiano is
subsequently became the Deputy and a Member of both the Australian a chartered engineer with a BSc Hons in
General Manager of the China Rare Earth Institute of Company Directors and Chemical Engineering. He is a member of
Development Corporation, a commercial Australian Human Resources Institute. the Institute of Chemical Engineers and
arm of the State Council Rare Earth Leading Institution of Gas Engineers and a Fellow of
Group. Mr Zheng has also previously held The Geological Society.
senior management positions in the Beijing
office of AMR Technologies Inc. (“AMR”), a The interests of the Directors in the ordinary
resources company listed on the Toronto share capital of the Company during the
Stock Exchange, where he co-coordinated period were:
relations with Chinese entities and was
responsible for AMR’s direct liaison with the
Chinese Government.
Third party indemnity insurance The financial statements do not include the The audit committee
The Company provides Directors’ and adjustments that would result if the Group The audit Committee comprises Phillip
Officers’ liability insurance at a cost of was unable to continue in operation. Sutherland (Chairman) and Anthony
£14,000 (2010: £13,000). Samaha, with two meetings held during the
Auditors period ended 30 June 2011. The Committee
Political contributions and charitable The Directors review the terms of reference reviews the Company’s annual and interim
donations for the auditors and obtain written financial statements before submission to
During the period there were no charitable confirmation that the firm has complied the Board for approval. The Committee also
or political donations (2010: £nil). with its ethical guidance on ensuring reviews regular reports from Management
independence. The level of fees charged and the external auditors on accounting and
Payment to suppliers is reviewed by the Board to ensure they internal control matters. When appropriate,
The Company’s and Group’s policy is to remain competitive and to ensure no the Committee monitors the progress of
settle terms of payment with suppliers when conflicts of interest arise. BDO LLP has action taken in relation to such matters.
agreeing terms of business, to ensure that indicated their willingness to continue in The Committee also recommends the
suppliers are aware of the terms of payment office as auditors of the Group. appointment of, and reviews the fees of, the
and to abide by them. Trade payables of external auditors.
the Company as at 30 June 2011 were Remuneration
equivalent to 71 (2010: 43) days’ purchases, The Company remunerates the Directors The remuneration committee
based on the average daily amount invoiced at a level commensurate with the size of The remuneration committee is made
by suppliers to the Group during the year. the Company and the experience of its up of Phillip Sutherland (Chairman) and
Directors. The Remuneration Committee Christopher Lambert, with one meeting
Post reporting date events has reviewed the Directors’ remuneration held during the period ended 30 June
Details of post reporting date events are and believes it upholds the objectives of the 2011. It is responsible for reviewing the
disclosed in Note 20 of the financial statements. Company with regard to this issue. Details performance of the Executive Directors and
of Directors’ emoluments and of payments for setting the scale and structure of their
Going concern made for professional services rendered remuneration, paying due regard to the
The Company raises money for exploration are set out in Note 6 to the Financial interests of shareholders as a whole and the
and capital projects as and when required. Statements. performance of the Company.
There can be no assurance that the
Group’s projects will be fully developed in Financial instruments Control procedures
accordance with current plans or completed The financial risk management policies and The Board has approved financial
on time or to budget. Future work on the objectives are set out in detail in Note 2 of budgets and cash forecasts. In addition,
development of these projects, the levels the financial statements. it has implemented procedures to ensure
of production and financial returns arising compliance with accounting standards and
therefrom may be adversely affected by Corporate governance effective reporting.
factors outside the control of the Group. The Directors are committed to maintaining
high standards of corporate governance. Provision of information to auditors
Under the terms of the JV, CNOOC- The Directors have established procedures, As far as the Directors are aware, there is
NEIA, will fund the BFS for the Arckaringa so far as is practicable, given the Company’s no relevant audit information of which the
Project and thereby the Group’s licence size, to comply with the UK Corporate Company’s auditors are unaware. Each
commitments up to A$40million, however Governance Code as modified by the Director has taken appropriate steps to
the Group requires further funds to meet recommendations of the Quoted Companies ensure that they are aware of such relevant
its operational commitments over the Alliance. The Company has adopted and information, and that the Company’s
next twelve months. The Directors remain operates a share dealing code for Directors auditors are aware of that information.
confident that the Group’s potential from and senior employees on substantially the
the development of the Arckaringa project, same terms as the Model Code appended to Annual general meeting
together with the Group’s historic proven the Listing Rules of the UKLA. This report and the Financial Statements
ability to raise additional funds, will enable will be presented to shareholders for their
the Group to fully finance its future working The Board approval at the Company’s Annual General
capital requirements beyond the period of The Board meets regularly throughout Meeting (“AGM”). The Notice of the AGM
twelve months of the date of this report. the year. To enable the Board to perform will be distributed to shareholders together
However, there can be no guarantee that its duties, each of the Directors has full with the Annual Report.
the required funds will be raised within access to all relevant information and to
the necessary timeframe. Consequently a the services of the Company Secretary. If By order of Board:
material uncertainty exists that may cast necessary the Non-Executive Directors may
significant doubt on the Group’s ability to take independent professional advice at the Anthony Samaha
fund this cash shortfall and therefore be able Company’s expense. The Board currently Director
to meet its commitments and discharge its includes two Non-Executive Directors. The 9 November 2011
liabilities in the normal course of business for Board has delegated specific responsibilities
a period not less than twelve months from to the committees described below.
the date of this report.
The Directors are responsible for preparing The Directors are responsible for keeping
the annual report and the financial adequate accounting records that
Our Governance
statements in accordance with applicable are sufficient to show and explain the
law and regulations. company’s transactions and disclose
with reasonable accuracy at any time the
Company law requires the Directors to financial position of the company and
prepare financial statements for each enable them to ensure that the financial
financial year. Under that law the Directors statements comply with the requirements
have elected to prepare the group and of the Companies Act 2006. They are also
company financial statements in accordance responsible for safeguarding the assets
with International Financial Reporting of the company and hence for taking
Standards (IFRSs) as adopted by the reasonable steps for the prevention and
European Union. Under company law the detection of fraud and other irregularities.
Directors must not approve the financial
statements unless they are satisfied that Website publication
they give a true and fair view of the state The Directors are responsible for ensuring
of affairs of the group and company and of the annual report and the financial
the profit or loss of the group and company statements are made available on a website.
for that period. The Directors are also Financial statements are published on
required to prepare financial statements in the company’s website in accordance
accordance with the rules of the London with legislation in the United Kingdom
Stock Exchange for companies trading governing the preparation and dissemination
securities on the Alternative Investment of financial statements, which may vary
Market. from legislation in other jurisdictions. The
maintenance and integrity of the company’s
In preparing these financial statements, the website is the responsibility of the Directors.
Directors are required to: The Directors’ responsibility also extends
to the ongoing integrity of the financial
»» select suitable accounting policies and statements contained therein.
then apply them consistently;
»» make judgements and accounting
estimates that are reasonable and
prudent;
»» state whether they have been prepared
in accordance with IFRSs as adopted
by the European Union, subject to
any material departures disclosed and
explained in the financial statements;
»» prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
company will continue in business.
Our Financials
Group
2011 2010
Notes £’000 £’000
Share-based payments expense (191) (1,099)
Other administrative expenses (1,520) (1,512)
Total administrative expenses and loss from operations 4 (1,711) (2,611)
Finance income 5 14 13
Loss before taxation (1,697) (2,598)
Tax 9 104 156
Loss for the year attributable to the equity holders of the parent (1,593) (2,442)
Group Company
2011 2010 2011 2010
Notes £’000 £’000 £’000 £’000
ASSETS
Non-current assets
Intangible assets 10 12,227 10,039 — —
Property, plant and equipment 11 11 11 4 10
Investment in subsidiaries 12 — — 1,432 1,432
Other receivables 13 3 85 11,430 8,947
Total non-current assets 12,241 10,135 12,866 10,389
Current assets
Trade and other receivables 13 192 221 166 56
Cash and cash equivalents 1,563 2,427 1,424 2,417
Total current assets 1,755 2,648 1,590 2,473
TOTAL ASSETS 6 13,99 12,783 14,456 12,862
LIABILITIES
Non-current liabilities
Provisions 15 300 300 300 300
Current liabilities
Trade and other payables 14 188 291 143 112
Provisions 15 — 100 — 100
Total current liabilities 188 391 143 212
The financial statements were approved by the Board and authorised for issue on 9 November 2011 and signed on its behalf by:
Anthony Samaha
Director
Our Financials
Group Company
2011 2010 2011 2010
£’000 £’000 £’000 £’000
Operating activities
(Loss)/Profit (1,593) (2,442) 316 (1,143)
Finance income (14) (13) (14) (7)
Depreciation 22 19 20 19
Foreign exchange on loans to controlled entities — — (1,717) (1,129)
Share options expensed 191 1,099 191 1,099
(Increase) in receivables (135) (202) (110) (50)
(Decrease)/increase in payables (80) 41 31 5
Cash used in operations (1,609) (1,498) (1,283) (1,206)
Income tax benefit received 244 152 — —
Net cash flows used in operating activities (1,365) (1,346) (1,283) (1,206)
Investing activities
Payments to acquire intangible fixed assets (647) (445) — —
Acquisition of plant and equipment (22) — (14) —
Loans to subsidiary — — (866) (587)
Interest received 14 13 14 7
Net cash flows used in investing activities (655) (432) (866) (580)
Financing activities
Proceeds from issue of shares 1,156 4,095 1,156 4,095
Issue costs paid — (195) — (195)
Net cash inflow from financing 1,156 3,900 1,156 3,900
Net (decrease)/increase in cash and cash equivalents (864) 2,122 (993) 2,114
Cash and cash equivalents at beginning of the year 2,427 305 2,417 303
Cash and cash equivalents at 30 June 1,563 2,427 1,424 2,417
Share
based Foreign
Share Share Merger payment exchange Retained Total
capital Premium reserve reserve reserve deficit equity
Group £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 July 2009 358 6,550 2,001 693 643 (3,255) 6,990
Total comprehensive loss for the
period — — — — 1,113 (2,442) (1,329)
Issue of share capital 56 4,039 — — — — 4,095
Costs of issue of share capital — (195) — — — — (195)
Transfer on exercise of options — — — (56) — 56 —
Share-based payments — — — 2,531 — — 2,531
Cancellation of options — — — (220) — 220 —
Balance at 30 June 2010 414 10,394 2,001 2,948 1,756 (5,421) 12,092
Total comprehensive income/loss
for the period — — — — 1,662 (1,593) 69
Issue of share capital 16 1,140 — — — — 1,156
Transfer on exercise of options — — — (669) — 669 —
Share-based payments — — — 191 — — 191
Deferred share issue 2 396 — (398) — — —
Balance at 30 June 2011 432 11,930 2,001 2,072 3,418 (6,345) 13,508
The following described the nature and purpose of each reserve within owners’ equity:
Our Financials
1. ACCOUNTING POLICIES
The principal accounting policies are summarised below. They have been applied consistently throughout the year.
BASIS OF PREPARATION
The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£’000) unless otherwise
stated.
These financial statements have been prepared in accordance with IFRS as adopted for use in the European Union (EU), and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
GOING CONCERN
The financial statements have been prepared on a going concern basis. The Company raises money for exploration and capital projects
as and when required. There can be no assurance that the Group’s projects will be fully developed in accordance with current plans or
completed on time or to budget. Future work on the development of these projects, the levels of production and financial returns arising
therefrom may be adversely affected by factors outside the control of the Group.
Under the terms of the JV, CNOOC-NEIA, will fund the BFS for the Arckaringa Project and thereby the Group’s licence commitments up
to A$40million, however the Group requires further funds to meet its operational commitments over the next twelve months. The Directors
remain confident that the Group’s potential from the development of the Arckaringa project, together with the Group’s historic proven
ability to raise additional funds, will enable the Group to fully finance its future working capital requirements beyond the period of twelve
months of the date of this report. However, there can be no guarantee that the required funds will be raised within the necessary timeframe.
Consequently a material uncertainty exists that may cast significant doubt on the Group’s ability to fund this cash shortfall and therefore be
able to meet its commitments and discharge its liabilities in the normal course of business for a period not less than twelve months from the
date of this report.
The financial statements do not include the adjustments that would result if the Group was unable to continue in operation.
The following new standards, interpretations and amendments to published standards effective in the year have been adopted by the Group:
* Not yet endorsed by European Union. The adoption of IFRS 9 will eventually replace IAS 39 in its entirety and consequently may have
a material affect the presentation, classification, measurement and disclosures of the Group’s financial instruments, however its impact
on the financial statements has not yet been assessed. The Group have reviewed the likely impact of IFRS 11, and as a joint operator
consider that the current policy for accounting for its joint arrangements will remain unchanged therefore except for the amended
disclosure requirements of IAS 24 (Revised), the new standards, amendments and interpretations are not expected to materially affect the
Group’s reporting or reported numbers in future periods.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income
from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those
used by other members of the Group. All inter-group transactions, balances, income and expenses are eliminated in full on consolidation.
Impairment of intangibles
The Group determines whether intangibles are impaired when facts and circumstances suggest that the carrying amount may exceed its
recoverable amount. Such indicators include the point at which a determination is made as to whether or not commercial reserves exist. The
carrying amount of intangibles at 30 June 2011 was £12,227,000 (2010: £10,039,000), refer note 10.
Transactions entered into by group entities in currency other than the currency of the primary economic environment in which they operate
(the “functional” currency) are recorded at rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are
translated at the rates ruling at the reporting date.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction. Non–monetary assets and liabilities denominated in foreign currencies that are stated at fair value are
translated to Pounds Sterling at the foreign exchange rates ruling at the dates the fair value was determined.
On consolidation, the results of the operations are translated into Pounds Sterling at average rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange
differences arising on translating the opening net assets at closing rate are recognised directly in equity (the “foreign exchange reserve”).
Exchange differences recognised in the statement of comprehensive income of group entities’ separate financial statements on the
translation of long-term monetary items forming part of the Group’s net investment in the overseas operation concerned are reclassified to
the foreign exchange reserve if the item is denominated in the functional currency of the Company or the overseas operation concerned.
BUSINESS COMBINATIONS
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is
measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under IFRS 3 Revised Business Combinations are recognised at their fair values at the acquisition date.
TAXATION
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all
deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilised except for differences arising on investments in subsidiaries and jointly controlled entities where the
group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable
future.
Recognition of the deferred tax assets is restricted to those instances where it is probable that the taxable profit will be available against
which the difference can be utilised.
Deferred tax is calculated based on rates enacted or substantively enacted at the reporting date and expected to apply when the related
deferred tax asset is realised or liability settled.
Current and deferred tax is charged or credited in the consolidated statement of comprehensive income, except when it relates to items
charged or credited directly to equity, in which case the related tax is also dealt with in equity. Research and Development tax credits are
recognised when they can be determined to be reliably measured.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date,
taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is
recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
(i) the rights to tenure of the area of interest are current; and
(a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the
area of interest, or alternatively, by its sale, or
(b) Exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation
to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include the acquisition of rights to explore, studies, exploratory drilling,
trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and
evaluation activities. General, administrative and share-based payment costs are only included in the measurement of exploration and
evaluation costs where they are related directly to exploration and evaluation activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts or circumstances suggest that the carrying amount of an
exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (or the
cash-generating unit(s) (‘CGU’) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine
the extent of the impairment loss (if any).
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset in previous years.
The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable
amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the
assets employment and subsequent disposal. The expected net cash flows have been discounted to their present value in determining
recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefit associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred.
Depreciation
Depreciation is calculated on a straight-line basis so as to write off the net cost of each asset over its expected useful life to its estimated
residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter,
using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual
reporting period, with the effect of any changes recognised on a prospective basis.
Leasing
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an ‘operating lease’), the total
rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease
term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line
basis. The land and buildings elements of property leases are considered separately for the purposes of lease classification.
FINANCIAL ASSETS
The only financial assets currently held by the Group are classified as loans and receivables and cash and cash equivalents. These assets
are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised
at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty
or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the
amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows
associated with the impaired receivable. For receivables, which are reported net, such provisions are recorded in a separate allowance
account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On
confirmation that the receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement of financial position.
Included within loans and receivables are cash and cash equivalents which include cash in hand and other short term highly liquid
investments with a maturity of three months or less. Any interest earned is accrued monthly and classified as interest. Short term deposits
comprise deposits made for varying periods of between one day and three months.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Derecognition
Financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the asset
and substantially all the risk and rewards of ownership of the asset to another entity.
The Group’s accounting policy for the other financial liabilities category is as follows:
Trade payables and other short-term monetary liabilities, are initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method. All interest and other borrowing costs incurred in connection with the above are expensed as incurred
and reported as part of financing costs in the consolidated statement of comprehensive income.
Derecognition
Financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
FINANCE INCOME
Finance income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of
a financial assets and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
MERGER RESERVE
The difference between the fair value of an acquisition and the nominal value of the shares allotted in a share exchange has been credited to
a merger reserve account, in accordance with the merger relief provisions of the Companies Act 2006 and accordingly no share premium for
such transactions has been setup.
Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged
with the fair value of goods and services received over a straight line basis over the vesting period based on the Group’s estimate of shares
that will eventually vest, except where it is in respect to costs associated with the issue of securities, in which case it is charged to the share
premium account.
Other
Loans and financial
receivables liabilities Total
Group 30 June 2011 £’000 £’000 £’000
Assets as per statement of financial position
Trade and other receivables 106 106
Cash and cash equivalents 1,563 — 1,563
1,669 1,669
Liabilities as per statement of financial position
Other financial liabilities – non-current — 300 300
Trade and other payables — 177 177
— 477 477
Group 30 June 2010
Assets as per statement of financial position
Other receivables – non-current 85 — 85
Trade and other receivables 35 — 35
Cash and cash equivalents 2,427 — 2,427
2,547 — 2,547
Liabilities as per statement of financial position
Other financial liabilities – non-current — 400 400
Trade and other payables — 291 291
— 691 691
Company 30 June 2011
Assets as per statement of financial position
Other receivables – non-current 11,430 — 11,430
Trade and other receivables 93 — 93
Cash and cash equivalents 1,424 — 1,424
12,947 — 12,947
Liabilities as per statement of financial position
Other financial liabilities – non-current — 300 300
Trade and other payables — 143 143
— 443 443
Assets as per statement of financial position
Other receivables – non-current 8,947 — 8,947
Trade and other receivables 32 — 32
Cash and cash equivalents 2,417 — 2,417
11,396 — 11,396
Liabilities as per statement of financial position — 400 400
Other financial liabilities – non-current — 112 112
Trade and other payables — 512 512
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and currency risk. The Directors review and agree
policies for managing these risks and these are summarised below. There have been no substantive changes to the Group’s exposure
to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from
previous periods unless otherwise stated in this note.
There is no significant difference between the carrying value and fair value of receivables and cash and cash equivalents.
Credit Risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with creditworthy counterparties, as assessed by the Directors using relevant available information.
Credit risk also arises on cash and cash equivalents and deposits with banks and financial institutions. The Group’s cash deposits are only
held in banks and financial institutions which are independently rated with a minimum credit agency rating of A.
There were no bad debts recognised during the period and there is no provision required at the reporting date.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its
financial obligations as they fall due. Short term payables are classified as those payables that are due within 30 days.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this
aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 45 days.
Currency risk
The functional currencies of the companies in the Group are Pounds Sterling and Australian Dollars. The Group does not hedge against the
effects of movements in exchange rates. These risks are monitored by the Board on a regular basis.
The following table discloses the year end rates applied by the Group for the purposes of producing the financial statements:
Australian
Foreign currency units to £1.00 GBP Dollar
At 30 June 2011 1.51
At 30 June 2010 1.76
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as
follows:
Liabilities Assets
2011 2010 2011 2010
£’000 £’000 £’000 £’000
Australian Dollar 34 180 152 179
The impact of a 10% fluctuation in the value of the Australia Dollar would result in net translation gains or losses of £19,000 (2010: £7,000)
movement in the consolidated statement of comprehensive income and net assets of the Group. The only monetary asset the Company has
is the intercompany loan. A 10% fluctuation in the value of the Australian Dollar would result in a net translation gain or loss of £1,215,000
(2010: £1,030,000)
The Group and Company manages the interest rate risk associated with the Group and Company cash assets by ensuring that interest
rates are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits, whilst managing the access
the Group and Company requires to the funds for working capital purposes.
The interest rate profile of the Group’s cash and cash equivalents was as follows:
Pound Australian
Sterling Dollar Total
30 June 2011 £’000 £’000 £’000
Cash at bank floating interest rate 1,423 140 1,563
Pound Australian
Sterling Dollar Total
30 June 2010 £’000 £’000 £’000
Cash at bank floating interest rate 2,381 — 2,381
Cash at bank on which no interest is received 36 10 46
2,417 10 2,427
At reporting date, cash at bank floating interest rate is accruing weighted average interest of 0.6% (2010: 0.92%) As required by IFRS 7, the
Group has estimated the interest rate sensitivity on year end balances and determined that a two percentage point increase or decrease in
the interest rate earned on floating rate deposits would have caused a corresponding increase or decrease in net income in the amount of
£60,000 (2010: £48,000).
Capital Management
The Group considers its capital to comprise its ordinary share capital, share premium and accumulated retained losses as well as the
reserves (consisting of share-based payments reserve, foreign currency translation reserve and merger reserve).
The Group’s objective when maintaining capital is to safeguard the entity’s ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders.
The Company meets its capital needs by equity financing. The Group sets the amount of capital it requires to fund the Groups project
evaluation costs and administration expenses. The Group manages its capital structure and makes adjustments to it in the light of changes
in economic conditions and the risk characteristics of the underlying assets.
The Company and Group do not have any derivative instruments or hedging instruments. It has been determined that a sensitivity analysis
will not be representative of the Company’s and Group’s position in relation to market risk and therefore, such an analysis has not been
undertaken.
Fair values
The fair values of the Group and Company’s financial instruments approximates to their carrying value.
The Group operates in one segment, the evaluation of the Arckaringa coal and CTL project in South Australia. The Parent Company
operates a head office based in the United Kingdom which incurred certain administration and corporate costs. The Group’s operations
principally span two countries, Australia and the United Kingdom, the operations of the Beijing branch are included within the Administration
and Corporate activity in the UK and are therefore not separately considered in this analysis because the operating segment does not
breach 10% of any of the analysis provided.
Segment result
Segment result
2011 2010
Continuing operations £’000 £’000
Coal and CTL project (Australia) (296) (333)
Administration and Corporate (United Kingdom) (1,415) (2,278)
(1,711) (2,611)
Finance income 14 13
Loss before tax (1,697) (2,598)
Income tax benefit 104 156
Loss after tax (1,593) (2,442)
The share-based payment charge is included within the United Kingdom segment result.
Segment assets and liabilities
Non-Current Assets Non-Current Liabilities
2011 2010 2011 2010
£’000 £’000 £’000 £’000
Coal and CTL project (Australia) 12,227 10,043 — —
Administration and Corporate (United Kingdom) 14 92 300 300
Total of all segments 12,241 10,135 300 300
The Group recognised salaries and fees and long term payments of £1,023,000 (2010: £1,083,000) during the year, of which £346,000
1
The Group recognised £191,000 (2010: £2,531,000) related to equity-settled share-based payment transactions during the year, of
2
5. FINANCE INCOME
Group
2011 2010
£’000 £’000
Bank interest receivable 14 13
The Group averaged 8 employees during the period ended 30 June 2011 (2010: 7 employees). The Company averaged 7 employees during
the period (2010: 6 employees). The amount capitalised to intangible assets relates to a portion of the staff costs in connection with three of
the Group’s Directors.
1
Included in other benefits is the provision for £NIL (2010: £400,000) in success fees payable in respect to JV performance milestones
(refer Note 15 and Note 19). During the year ended 30 June 2011 £100,000 of the aforementioned success fees was paid to Michael
Zheng. As at 30 June 2011 £300,000 (2010: £400,000) remains payable.
2
No Director share options were issued, exercised or cancelled in the year. In the prior year the share based payment charge of
£1,548,000 included a share based payment charge of £1,432,000 for Mr Zheng are in respect of JV success fees related to the issue of
2,500,000 ordinary shares upon satisfaction of conditions precedent to the JV and the issue of 6,500,000 options exercisable at 0.1p, of
which 3,000,000 vest upon completion of Stage 1 of the BFS and 3,500,000 vest upon completion of Stage 2 of the BFS (refer Note 19).
3
Peter Fagiano was appointed as a director on 1 January 2011.
The total amount payable to the highest paid director in respect of emoluments was £250,000 (2010: £184,000).
No Directors exercised any share options during the period. The pension expense relates to compulsory superannuation in Australia.
The Company provides Directors’ and Officers’ liability insurance at a cost of £14,000 (2010: 13,000). This cost is not included in the above
table.
This is divided by the weighted average number of Ordinary shares outstanding calculated to be 419.4 million (2010: 381.6 million) to give a
basic loss per share of 0.38 pence (2010: basic loss per share of 0.64 pence).
As inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive and, as
such, the effect of the dilution has not been applied in the calculation. The potential future share issues that may dilute the loss per share
relate to options in issue and deferred shares disclosed at note 17
Exploration and evaluation relates to the development of an integrated coal-to-liquid plant and co-generation power facility, supported by an
open-cut coal mine at its Arckaringa Project in South Australia.
Group Company
£’000 £’000
Cost
Opening balance at 1 July 2009 69 67
Additions — —
At 30 June 2010 69 67
Additions 22 14
At 30 June 2011 91 81
Depreciation
Opening balance at 1 July 2009 39 38
Depreciation charge for the year 19 19
At 30 June 2010 58 57
Depreciation charge for the year 22 20
At 30 June 2011 80 77
Net book value
At 30 June 2011 11 4
At 30 June 2010 11 10
At 30 June 2009 30 29
12. INVESTMENTS
UNLISTED INVESTMENTS
Company
2011 2010
£’000 £’000
Cost
Investments in subsidiaries 1,432 1,432
The Company capitalised within investments in subsidiaries, share-based payments of £1,432,000 in respect of share options granted to
employees of the Company for work performed on the Project.
Company
2011 2010
£’000 £‘000
Opening balance 1,432 —
Additions — 1,432
Closing balance 1,432 1,432
Holding
Entity Country of Registration 2011 % 2010 % Nature of Business
Direct
Altona Australia Pty Limited Australia 100 100 Dormant
holding Company
Indirect
Arckaringa Energy Pty Limited Australia 100 100 Evaluation of the
Arckaringa Project
Group Company
2011 2010 2011 2010
£’000 £’000 £’000 £’000
Current trade and other receivable
Other receivables (i) 29 35 29 32
Tax credit receivable 20 158 — —
Prepayments and rent deposit (iii) 143 28 137 24
192 221 166 56
Other receivables are non interest bearing and generally repayable between 30-60 days.
The loans to wholly owned subsidiaries are non interest bearing and are repayable on demand, however payment is not anticipated to be
within one year.
Group Company
2011 2010 2011 2010
£’000 £’000 £’000 £’000
Trade payables 112 178 106 88
Accruals and other payables 76 113 37 24
188 291 143 112
Trade and other payables are non interest bearing and are normally settled on terms of 30 days from month end.
15. PROVISIONS
Group Company
2011 2010 2011 2010
£’000 £’000 £’000 £’000
Current provision
Provision for success fee — 100 — 100
Upon completion of stage 1 of the BFS the Group will pay Michael Zheng £100,000 and upon the completion of stage 2 of the BFS, the
Group will pay Michael Zheng £200,000.
During the year ended 30 June 2011 the Group paid £100,000 of the success fee to Michael Zheng. In 2010 £400,000 in respect of the
recognition of the provision was capitalised to intangible assets, note 10, and were included in Michael Zheng’s remuneration figures in
note 6.
Group Company
2011 2010 2011 2010
£’000 £’000 £’000 £’000
431,656,853 ordinary shares of 0.1p each (2010:414,068,526) 432 414 432 414
See note 19, related party transactions for details of the issue to Michael Zheng.
1
– no vesting conditions
2
– vested 12 months from the date of grant;
3
– 50% of options vest immediately, with 50% vesting 12 months from date of grant;
4
– 3,000,000 options vest upon completion of Stage 1 of BFS and 3,500,000 options vest upon completion of Stage 2 of the BFS
(Refer Note 19).
5
– 25% of options vest every 6 months.
The highest and lowest price of the Company’s shares during the year was 14.3p and 8p (2010: 20.15p and 3.91p). The share price at year
end was 9p (2010: 11.15p).
Expected volatility was determined by calculating the historical volatility of the Group’s share price since listing.
In March 2010, the Company agreed success fees with Michael Zheng, a director of the Company, in respect of the achievement of the JV
(Refer Note 19). These success fees include the issue of 2,500,000 fully paid ordinary shares in the Company upon completion of conditions
precedent to the JV. The deferred shares were issued in the year ended 2011 and were not included in the above tables.
The Group recognised £191,000 (2010: £2,531,000) related to equity-settled share based payment transactions during the year, of which
£Nil (2010: £1,432,000) was capitalised to intangibles. There is a further £15,000 (2010: £206,000) to be recognised in the subsequent
financial period, in relation to the above issue of options.
18. COMMITMENTS
As at 30 June 2011, the Group had entered into the following material commitments:
Exploration commitments
The Group has three exploration tenements in South Australia. The exploration commitments relating to EL 4512 Wintinna, to EL 4511
Westfield and to EL 4513 Murloocoppie were met during the 2010 financial year. Under the terms of its three ELs, the Group expects that its
share of exploration commitments will be borne by CNOOC under the terms of the Joint Venture agreement.
In the current year the Group issued Mr Zheng with 2,500,000 fully paid ordinary shares and paid him £100,000 under the success fee
agreement entered into between Mr Zheng and the Company. These payments were in respect of milestone achievements under this
agreement.
The milestone achievements were established in March 2010 when the Company agreed success fees with Michael Zheng, a director of the
Company, which were contingent in respect of the achievement of the JV and its subsequent progress. Upon satisfaction of the completion
of conditions precedent to the JV, Mr Zheng was entitled to receive £100,000 and be issued with 2,500,000 fully paid ordinary shares in the
Company, during 2011 the conditions precedent in respect of these two conditions were met and the payments were made.
Furthermore in 2010 Mr Zheng was issued with 6,500,000 options, exercisable at 0.1p, of which 3,000,000 vest upon completion of Stage
1 of the BFS and 3,500,000 vest upon completion of Stage 2 of the BFS. Mr Zheng will receive a further £100,000 upon completion of
Stage 1 of the BFS and a further £200,000 upon completion of Stage 2 of the BFS.
The share-based payments calculation is disclosed in Note 17 Share Based Payments, and the financial impact is included in the numbers
disclosed in Note 6 Staff Costs. The cash element above is disclosed in Note 15 Provisions.
During the period, the Company paid £250,000 (2010: £184,000) to CJL Consultants Limited, a company related to Christopher Lambert,
for Director Fees. These fees are included in the numbers disclosed in Note 6 Staff Costs.
During the period, the subsidiary company Arckaringa Energy Pty Ltd paid rent and other administrative expenses of £53,000 (2010:
£50,000) to PepinNini Minerals Limited, a company of which Christopher Lambert and former Director Norman Kennedy are Directors. At 30
June 2011, there was £Nil owing (2010: £15,000).
During the period, the Group paid £27,000 (2010: £Nil) in respect of Directors fees to Sutherland People Pty limited, a company related to
the Group by Phil Sutherland, a common Director, a further amount of £10,000 (2010: £Nil) in respect of recruitment services provided to the
subsidiary company Arckaringa Energy Pty Limited (2010: £Nil). At 30 June 2011, there was £Nil owing/owed (2010: £Nil).
In the event that an additional stamp duty payment is required the amount paid would represent an increase in the amount recognised as
capitalised exploration and evaluation expenditure.
The Group has not recognised a liability in connection to additional stamp duty as the Directors believe that no further stamp duty is payable
in connection to this matter, based on professional advice received at the time of acquisition and subsequently, and in the absence of further
details from Revenue SA.
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