Interim Results

Centamin Egypt Limited 14 March 2002 Centamin Egypt Limited FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2001 DIRECTORS' REPORT The Directors present their report together with the financial statements of Centamin Egypt Limited ('the Company') and its controlled entities, for the half-year ended 31 December 2001 and the auditor's review thereon. directors The Directors of the Company in office during or since the end of the half-year are: Mr Sami El-Raghy B.Sc. (Hons), FAusIMM, FSEG Chairman and Managing Director A graduate of Alexandria University in 1962, Mr. El-Raghy worked in Egypt and Europe before moving to Australia in 1968 and joining American Smelting and Refining Company (Asarco). He was the prime mover in the discovery and development of a number of gold mines, including the Wiluna Gold Mine for Asarco and the Mt Wilkinson Gold mine for Chevron Exploration. Mr. El-Raghy recognised the potential of the Marymia Dome and the Barwidgee Yandal Belt long before these areas became the most sought after mining areas in Australia. Mr. El-Raghy has been a director of the company since 1993. He brings to the board over 35 year's experience in the industry, both in Australia and overseas. Mr Colin Cowden FAII, ASA, ACIS, ACIM, FNIBA, CD Non Executive Director Director since March 1982 Mr Cowden is the Executive Chairman of Cowden Limited a licensed insurance broking company formed in 1972. Cowden Limited has grown into a prominent broking firm in Western Australia with branch offices in Sydney, Melbourne and Adelaide. Mr G Brian Speechly FAusIMM Non Executive Director Director since August 2000 Mr Speechly is a Fellow of the Australasian Institute of Mining and Metallurgy with over 44 years experience in the mining industry. Over the course of his career Mr Speechly has been involved in over 300 mining projects and is recognised in Australia and overseas as an expert in both underground and open pit mining and design. He is particularly noted for his innovative and low cost approaches to mining issues. All directors held office during and since the end of the period. MANAGEMENT Mr Michael Kriewaldt MSc, FAusIMM, MGSA, FSEG, MAIG Mr Kriewaldt holds the degree of Master of Science and has worked as a geologist since 1955 with Mt Isa Mines, Broken Hill South, The Geological Survey of Western Australia, Asarco Australia and Eon Metals, during which time he has amassed considerable knowledge and experience in the exploration for gold and base metals. He is credited with directing the attention of Asarco to the Wiluna Gold Mines area and was instrumental in the success of the company in that area. Mr Kriewaldt also recognised the potential of the Nelson's Fleet project and was solely responsible for the success of Centamin's exploration effort in that area. He is a member of the following professional bodies: • The Australasian Institute of Mining and Metallurgy. • The Australian Institute of Geoscientists. • The Geological Society of Australia. • The Society of Economic Geologists Mr Simon Durack BComm, Post Grad Dip Bus, CA, FCIS, AFAIM, JP Mr Durack is a Chartered Accountant and has many years experience in financial control, auditing and company administration. Mr Durack is also a Justice of the Peace. Mr John Lynch Mr. Lynch has been in the mining industry in a technical capacity for over 30 years, with Western Mining, Chevron Exploration and Eagle Mining. principal activities The principal activity of the consolidated entity during the course of the half-year was the exploration for precious and base metals. There were no significant changes in the nature of the activities of the consolidated entity during the period. DIVIDENDS No dividends have been declared or paid since the end of the previous half-year. AUDIT COMMITTEE At the date of this report the Company does not have a formally constituted audit committee of Directors. As matters arise they are immediately addressed by the relevant authorities. REVIEW OF OPERATIONS INTRODUCTION Exploration and Mining Tenements The Company controls mineral exploration and mining tenements in Egypt and Australia. The emphasis is on the Egyptian holdings. The interests are set out below: Mineral exploration and mining tenements held in Queensland and Western Australia Name Tenement Note Interest at Interest at reference 31st Dec.2000 31st Dec. 2001 Mitchell River Qld EPM8776 1 100% 0% Lynd River Qld EPM8812 2 100% 0% Lynd River Qld EPM8993 2 100% 0% Lynd River Qld EPM9678 2 100% 0% Nelson's Fleet WA M15/570 3 0% 0% Nicholls WA E80/1708 4 50% 10% Notes: 1. Mitchell River tenements have been surrendered and bond monies have been refunded to the Company. 2. Lynd River tenements were assigned to an unrelated company which has replaced the Company's bond monies. The bond monies have been refunded to the Company by the Queensland Mines Department. 3. The Nelson's Fleet tenement has been sold to WMC Resources with a royalty payment in place 4. Joint venture with Mandor Mining Pty Ltd and Castlegem Pty Ltd with Castlegem earning upto 80% through expenditure on exploration. Mineral exploration and mining tenements held in Egypt Name Tenement Note Interest at Interest at reference 31st Dec. 2000 31st Dec. 2001 Eastern Desert Law 222 for 1995 1 100% 100% Rosetta Concession 2 50% 50% Notes: 1. Pharaoh Gold Mines NL (a wholly owned subsidiary of Centamin Egypt Ltd) holds the Eastern Desert Concession which consists of three defined project areas, which comprise a total area of over 4600km2. On 4th November 2001 the Company was granted an exploitation lease over the entire concession area (4,600km2). The exploitation lease gives tenure for 30 years with an option to renew for a further 30 years. 2. Egyptian mineral concession held by Egyptian Pharaoh Investment (EPI) an Egyptian company jointly owned by Centamin Egypt Limited and Kara Gold NL under an agreement with the Egyptian Government. Under the terms of this agreement to develop a heavy minerals project at Rosetta on the Mediterranean coast, east of Alexandria, any profit from mining and separation of the heavy minerals will be shared with the Egyptian Government after EPI recoups all of its development expense. Any profit from the upgrading of the ilmenite to pigment quality TiO2 (titanium oxide) will be 100% EPI. Exploration & Development Centamin now operates solely in Egypt apart from its share in the Nicholls diamond project joint venture in the Kimberley Region of Western Australia. EGYPTIAN PROJECTS SUKARI Diamond drilling has continued at the Company's Sukari gold project in conjunction with mappng and surface sampling in a 20 km radius of Sukari. Both the drilling and sampling have returned highly favourable results, allowing the company to upgrade the resource base along with highlighting future targets. The global recoverable resource has been enlarged. Also the new high-grade 'Hapi' zone was discovered. The company has resisted the urge to concentrate on this zone, instead continuing in its endeavour to increase the global resource and to upgrade the inferred resources to indicated and measured. Where possible the drilling is extended to test the new Hapi zone. Significant intersections from the Sukari project since the 2000 report are as follows: Hole No. Intersection Average grade From To m g/t gold m m SDDH169 14.25 94.43 242.75 257.00 SDDH172 3.00 124.43 282.00 285.00 SDDH173 3.00 28.80 301.00 304.00 SDDH174 38.00 2.18 108.00 140.00 SDDH175 14.22 3.00 117.00 120.00 SDDH177 14.00 3.17 166.00 180.00 SDDH184 29.00 3.83 210.00 239.00 12.00 7.50 223.00 235.00 SDDH185 22.00 3.42 117.00 139.00 SDDH187 27.00 1.29 44.00 71.00 35.00 2.03 94.00 129.00 SDDH190 21.00 6.70 87.00 108.00 2.00 58.25 101.00 103.00 SDDH193 27.00 2.28 41.00 68.00 20.00 4.12 142.00 162.00 SDDH194 8.00 2.20 61.00 69.00 24.00 2.62 121.00 145.00 SDDH195 4.00 4.62 148.00 152.00 3.00 3.38 156.00 159.00 SDDH198 6.00 3.84 85.00 91.00 59.00 2.77 104.00 163.00 1.00 53.80 145.00 146.00 SDDH199 27.00 3.99 120.00 147.00 4.00 13.02 171.00 175.00 SDDH201 4.25 2.22 75.00 79.25 11.25 2.51 82.00 93.25 As reported during the year, surface sampling has returned some encouraging results with values such as 350g/t gold 2.5km north of Sukari Hill, 126g/t 7.5km south and 26g/t 18km west. These results have been backed up by associated sampling, not of the same high grade but sufficient to give confidence that they are not isolated readings. They show that gold mineralisation is widespread in this mineralised province. Mineral Resource Ongoing recoverable resource upgrades on the Amun zone of the Sukari gold deposit are continuing to increase the quantity of contained gold. Hellman & Schofield Pty Ltd carry out these upgrades, and the latest figures using information up to drill hole number SDDH 201 are: Resource at 0.5g/t gold cut-off Type Million Tonnes Grade - g/t gold Million ounces (gold) Measured 9.3 1.41 0.42 Indicated 12.1 1.38 0.54 Sub Total 21.4 1.39 0.96 Inferred 15.6 1.52 0.77 Total 37.0 1.44 1.73 Resource at 1.0g/t gold cut-off Type Million Tonnes Grade - g/t gold Million ounces (gold) Measured 4.9 2.03 0.32 Indicated 6.1 2.03 0.40 Sub Total 11.0 2.03 0.72 Inferred 8.0 2.30 0.59 Total 19.0 2.14 1.31 The total (measured, indicated & inferred) recoverable resource is now 1.73M.oz at 0.5g/t cut off. The company has been concentrating drilling over the Amun zone with the purpose of converting inferred resources into measured and indicated. Exploration is now at a stage where one or two of the drills can be moved to test the RA zone to the north. The high grade Hapi zone will also be further drilled. Open Pit Design As part of the feasibility studies, Mining Solutions Consultancy were contracted to carry out mine planning and scheduling using Whittle optimisation. Preliminary results have confirmed that the current resource can profitably support a 2 million tonne per year processing operation over a period of five years The current 'in-pit' resource is: C.O.G. Measured & Indicated Resource All Resources M Grade gold M Stripping Ratio M Grade gold M Stripping g/t tonnes g/t ounces tonnes g/t ounces Ratio 0.80 9.7 1.81 .57 1:4.1 14.1 1.98 .90 1:4.5 Note: C.O.G. = Cut Off Grade, M = Million, g/t = grams of gold per tonne. Stripping Ratio = ore:waste The low stripping (waste to ore) ratio may possibly be even lower when grade control drilling is carried out over the upper sections of the hill. Due to the steep terrain, conventional drill rigs have not been able to test the top of the hill and this ground has been treated as waste for the feasibility study. A small number of drill holes in the upper zone suggest that there will be zones of mineralisation which will be of economic grade. Geology The gold at Sukari occurs in altered micro-granitic and porphyritic felsic rocks with variable quartz veining in reefs and stockworks, and in breccias. Pyrite is rarely more than 2%. Arsenopyrite and traces of base-metal sulphides are associated with the pyrite. Rarely is gold seen in the core. At the surface the rocks are commonly crumbly like sugar grains. At depth there are in many places silicified hard rocks that are auriferous, but many of the higher gold grades seen in core are associated with altered jointed and friable rocks. Very weak oxidation is generally to a depth of 10 to 20 metres, also weak oxidation to 50m plus down narrow shear zones and faults. The bulk of the resource is 'fresh' rock. The host rocks form a sharp ridge from 200 to 800 metres wide that rises up to 200 metres above the adjacent dry wadi floors. At the southern end of the property (known as the Amun zone) the general dip of the mineralised zones is to the south-east at about 40 degrees. Treatment Plant KC Dodd Consulting Engineers have been working on the design of a 2 million tonne a year process plant with the view to future expansion up to 10 million tonnes per year. The process will be CIL, a proven method used extensively in Australia over the last 25 years. Water for the process will be saline and pumped approximately 20km from either the Red Sea or on-shore bores, with desalination for domestic use and gold recovery. A rock walled valley will be used for tailings containment. On-site accommodation will be constructed at a reasonable distance from the mining and processing operations. Rosetta No exploration was carried out over the Rosetta heavy mineral concession during the year. AUSTRALIAN PROJECTS Nelsons Fleet Gold - Western Australia The Nelson's Fleet lease has been sold to WMC Resources on a royalty payment basis. Nicholls Diamonds - Western Australia The Company, together with Mandor Mining Pty Ltd has entered into a joint venture with Castlegem Pty Ltd, where Castlegem has the right to earn a controlling interest by contributing funding and managing the project. Mitchell River - Queensland These tenements have been surrendered and the Company's bond requirements have been released with bond monies refunded. Lynd River - Queensland These tenements have been assigned to an unrelated company with the bond monies being refunded to Centamin. General Exploration The Company is now directing all of its exploration efforts into Egypt and so has not carried out any exploration in Australia during the year. The intention is to focus on Egypt for the present. ASX LISTING RULE 5.10.1 Information in this Review of Operations which relates to exploration, geology, sampling and drilling is based on information compiled by consulting geologist Mr M Kriewaldt who is a corporate member of the Australasian Institute of Mining and Metallurgy with more than five years experience in the fields of activity being reported on and is not a full time employee of the Company. His written consent has been received by the Company for this information to be included in this report in the form and context which it appears. Mr Kriewaldt declares an interest in shares of the Company. The information in this report that relates to mineral resources is based on information compiled by Mr Nic Johnson, a member of the Australian Institute of Geoscientists. Mr Johnson is employed by Hellman & Schofield Pty Ltd a consultancy primarily concerned with estimation of mineral resources worldwide. Mr Johnson is a Competent Person under the meaning of the J.O.R.C. code with respect to the mineralisation being reported in this report. Mr Johnson has 14 years' experience in the mining industry and has given his consent to the public reporting of this information in the section headed Mineral Resources. The information in this report that relates to open pit mine design is based on information compiled by Mr Tamer Dincer of Mining Solutions Consultancy Pty Ltd. Mr Dincer is a member of the Australasian Institute of Mining and Metallurgy, a member of the Mineral Industry Consultants Association and has 15 years experience in the mining industry. Mr Dincer has given his consent for this information to be included in this report as presented under the heading Open Pit Design. DUAL LISTING On 21 December 2001, the Company successfully gained admission to the Alternative Investment Market of the London Stock Exchange, following the allotment of 45,000,000 ordinary fully paid shares, raising $7,750,486 in capital. Consequently, the Company now maintains a dual listing on both the Australian Stock Exchange and the Alternative Investment Market of the London Stock Exchange. Signed in accordance with a resolution of the directors made pursuant to s. 310 (2) of the Corporations Act 2001. On behalf of the Directors C COWDEN Director G B SPEECHLY Director Perth, 1 March 2002 INDEPENDENT AUDITOR'S REVIEW TO THE MEMBERS OF CENTAMIN EGYPT LIMITED Scope We have reviewed the financial report of Centamin Egypt Limited for the half-year ended 31 December 2001 as set out on pages 10 to 19. The financial report includes the consolidated financial statements of the consolidated entity comprising the disclosing entity and the entities it controlled at the end of the half-year or from time to time during the half-year. The disclosing entity's directors are responsible for the financial report. We have performed an independent review of the financial report in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the financial report is not presented fairly in accordance with Accounting Standard AASB 1029 'Interim Financial Reporting' issued in Australia and other mandatory professional reporting requirements and statutory requirements, so as to present a view which is consistent with our understanding of the consolidated entity's financial position, and performance as represented by the results of its operations and its cash flows, and in order for the disclosing entity to lodge the financial report with the Australian Securities and Investments Commission. Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements. A review is limited primarily to inquiries of the entity's personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Statement Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Centamin Egypt Limited is not in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity's financial position as at 31 December 2001 and of its performance for the half-year ended on that date; and (ii) complying with Accounting Standard AASB 1029 'Interim Financial Reporting' and the Corporations Regulations 2001; and (b) other mandatory professional reporting requirements. DELOITTE TOUCHE TOHMATSU PJ Messer Partner Chartered Accountants Perth, WA 11 March 2002 DIRECTORS' DECLARATION The directors declare that: a. The attached financial statements and notes thereto comply with Accounting Standards; b. The attached financial statements and notes thereto give a true and fair view of the financial position and performance of the consolidated entity; c. In the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001; and d. In the directors' opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the directors made pursuant to s.303 (5) of the Corporations Act 2001. On behalf of the Directors C COWDEN Director G B SPEECHLY Director Perth, 1 March 2002 CENTAMIN EGYPT LIMITED and its controlled entities FINANCIAL STATEMENTS for the half-year ended 31 December 2001 STATEMENT OF FINANCIAL PERFORMANCE Economic Entity Note Half-Year Ended Half-Year Ended 31 December 2001 31 December 2000 $ $ Revenue from ordinary activities 2 72,303 169,214 Employee benefits expense 41,567 50,333 Depreciation expense 6,941 910 Other expenses from ordinary activities 384,045 80,581 Profit/(Loss) From Ordinary Activities Before Income Tax Benefit (360,250) 37,390 Income tax benefit relating to ordinary activities - - Net Profit/(Loss) (360,250) 37,390 Net Profit/(Loss) attributable to outside equity interests - - Net Profit/(Loss) Attributable to Members of the Parent Entity (360,250) 37,390 Total Changes in Equity Other than those Resulting from (360,250) 37,390 Transactions with Owners as Owners Earnings Per Share - Basic (cents per share) (0.0011) 0.0001 The statement of financial performance is to be read in conjunction with the notes to and forming part of the half-yearly financial statements STATEMENT OF FINANCIAL POSITION Economic Entity 31 December 2001 30 June 31 December 2000 2001 $ $ $ CURRENT ASSETS Cash 6,768,689 3,071,644 1,366,259 Receivables 91,694 51,942 170,603 Prepayments 41,261 22,823 - Total current assets 6,901,644 3,146,409 1,536,862 NON-CURRENT ASSETS Receivables - - 38,000 Plant and equipment 60,138 62,187 332,386 Exploration expenditure 19,150,617 17,376,083 15,268,549 Total non-current assets 19,210,755 17,438,270 15,638,935 Total assets 26,112,399 20,584,679 17,175,797 CURRENT LIABILITIES Bank overdraft - - 390,509 Accounts payable 909,587 910,565 192,771 Interest bearing liabilities - 280,000 280,000 Non-Interest bearing liabilities 141,961 141,961 - Total current liabilities 1,051,548 1,332,526 863,280 NON-CURRENT LIABILITIES Accounts payable 1,713,240 1,913,240 1,632,015 Non-Interest bearing liabilities - - 187,501 Total non-current liabilities 1,713,240 1,913,240 1,819,516 Total liabilities 2,764,788 3,245,766 2,682,796 Net assets 23,347,611 17,338,913 14,493,001 EQUITY Contributed equity 39,264,159 32,895,211 29,895,211 Reserves 3,377,683 3,377,683 5,528,737 Accumulated losses (19,286,541) (18,926,291) (20,923,295) Parent entity interest 23,355,301 17,346,603 14,500,653 Outside equity interest (7,690) (7,690) (7,652) Total equity 23,347,611 17,338,913 14,493,001 The statement of financial position is to be read in conjunction with the notes to and forming part of the half-yearly financial statements. STATEMENT OF CASH FLOWS Economic Entity Half-Year Ended Half-Year Ended 31 December 2001 31 December 2000 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts in the course of operations 1,000 - Cash payments in the course of operations (700,216) (232,802) Interest received - other persons 36,417 52,253 Net cash provided by/(used in) operating activities (662,799) (180,549) CASH FLOWS FROM INVESTING ACTIVITIES Payment for purchases of property, plant & equipment (23,631) (487) Payments for exploration (1,755,794) (1,136,561) Net cash (used in) investing activities (1,779,425) (1,137,048) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of shares 7,750,486 - Issue costs (1,287,799) - Proceeds from borrowings - 63,924 Repayment of borrowings (280,000) - Net cash provided by financing activities 6,182,687 63,924 Net increase/(decrease) in cash held 3,740,463 (1,253,673) Effects of exchange rate changes on the balance of cash held in foreign currencies (43,418) 116,961 Cash at the beginning of the half-year 3,071,644 2,502,971 Cash at the end of the half-year 6,768,689 1,366,259 The statement of cash flows is to be read in conjunction with the notes to and forming part of the half-yearly financial statements. NOTES TO THE FINANCIAL STATEMENTS 1. statement of significant accounting policies The significant policies, which have been adopted in the preparation of these financial statements, are: A. BASIS OF PREPARATION The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 1029 'Half-Year Accounts and Consolidated Accounts'. The half-year financial report should be read in conjunction with the 2001 Annual Financial Report together with any announcements made by the company and its controlled entities during the half-year in accordance with any continuous disclosure obligations arising under the Corporations Act 2001. The consolidated accounts have been prepared on the basis of historical costs and do not take into account changing money values or, except where stated, current valuations of non-current assets. The accounting policies have been consistently applied by the entities in the economic entity and, except where there is a note of a change in accounting policy, are consistent with those of the previous year. B. PRINCIPLES OF CONSOLIDATION The consolidated accounts of the economic entity include the accounts of the company, being the chief entity, and its controlled entities. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The balances, and effects of transactions, between controlled entities included in the consolidated accounts have been eliminated. C. TAXATION The economic entity adopts the liability method of tax effect accounting. Income tax benefit is calculated on the profit/(loss) from ordinary activities adjusted for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain. D. NON-CURRENT ASSETS The carrying amounts of all non-current assets, except exploration expenditure, are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds the recoverable amount, the asset is written down to the lower amount. In assessing recoverable amounts the relevant cash flows have not been discounted to their present value. E. CHANGES IN ACCOUNTING POLICIES In December 1999, a new Accounting Standard AASB 1041, effecting the 'Revaluation of Non-Current Assets' was published as a new standard revising Accounting Standard AASB 1010. This Standard applies to reporting periods beginning on or after 1 July 2000. In July 2001 this Standard was revised. The directors have elected under s334(5) of the Corporations Act 2001 to apply the revised Standard for the financial year ended 30 June 2001, even though the Standard is not required to be applied until annual reporting periods ending on or after 30 September 2001. In applying the provisions of the new Accounting Standard AASB 1041 'Revaluation of Non-Current Assets' for the first time last year, investments and exploration expenditure have been adjusted retrospectively with effect from 1 July 2000 to measure items previously carried at revalued amounts to their cost of acquisition, as if they had always been measured using the cost basis. At 30 June 1999 the economic entity valued its investment in controlled entities and its carried forward exploration expenditure at directors' valuation. The directors' valuation was based upon an original valuation performed by ACA Howe International in August 1998 included in the Information Memorandum issued by the economic entity to support the acquisition of its subsidiary Pharaoh Gold Mines NL in November 1998. The directors discounted this valuation to reflect the fall in gold prices, movement in mineral sands prices and changes in resource status. As at 1 July 2000 the directors' elected to apply the provisions of the revised Accounting Standard AASB 1041 'Revaluation of Non-Current Assets' and have accordingly reversed the revaluation performed at 30 June 1999. Accordingly, the comparative figures in the statement of financial position as at 31 December 2000 have been adjusted as follows: • a reduction in the Consolidated carrying amount of exploration expenditure of $28,325,591; • a reduction in the Consolidated asset revaluation reserve of $28,325,591. B. INVESTMENTS Investments in controlled entities are carried in the company's accounts at recoverable amount. Dividends and distributions are brought to account in the statement of financial performance when they are proposed by the controlled entities. Refer also to Note 1 (G). C. EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE Exploration, evaluation and development costs are accumulated in respect of each separate area of interest where rights of tenure are current. These costs are carried forward where they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the year the decision is made. Each area of interest is also reviewed annually and accumulated costs written off to the extent that they will not be recoverable in the future. As at balance date: • The economic entity is still progressing exploration to delineate reserves; • A feasibility study with respect to the areas of interest is in the process of being completed; and • The realisable value is dependant upon the current and future gold and mineral sands prices. As a consequence of the above, the ability of the economic entity to recover the carrying amount of the investment and areas of interest at directors' valuation respectively, is dependant upon the successful development and commercial exploitation and/or sale of the relevant areas of interest. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward exploration, evaluation and development costs are amortised on units of production basis over the life of the economically recoverable reserves. Restoration costs are provided for at the time of the activities which give rise to the need for restoration. If this occurs prior to commencement of production, the costs are included in deferred exploration and development expenditure. If it occurs after commencement of production, restoration costs are provided for and charged to the statement of financial performance as an expense. B. PLANT AND EQUIPMENT Items of plant and equipment are recorded at cost and depreciated from the date of acquisition on a reducing balance method over their estimated useful lives. The following estimated useful lives are used in the calculation of depreciation: Plant & Equipment - 2 years Motor Vehicles - 2 years Drilling Rig - 1 year C. SUPERANNUATION FUND The Company contributes to, but does not participate in, compulsory superannuation funds on behalf of the directors' in respect of directors' fees paid. Contributions are charged against income as they are made. J. FOREIGN CURRENCY All foreign currency transactions during the year have been brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at balance date are translated at the exchange rate existing at that date. All exchange differences are brought to account in the statement of financial performance in the financial period in which they arise. The assets and liabilities of the controlled entity incorporated overseas (being an integrated foreign operation) are translated using the temporal method. Monetary items are translated using the exchange rate at balance date and non-monetary items are translated at exchange rates current at the transaction dates. The statement of financial performance is translated at the exchange rate current at the transaction date, except that non-monetary items are translated at the original rates. Exchange differences arising on translation are taken directly to the statement of financial performance. K. RECEIVABLES Trade receivables and other receivables are recorded at amounts due less any provision for doubtful debts. L. ACCOUNTS PAYABLE Trade payables and other accounts payable are recognised when the economic entity becomes obliged to make future payments resulting from the purchase of goods and services. M. DEBT AND EQUITY INSTRUMENTS ISSUED BY THE COMPANY Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. N. GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. O. COMPARATIVE AMOUNTS The economic entity has adopted the presentation and disclosure requirements of Accounting Standard AASB 1018 'Statement of Financial Performance', AASB 1034 'Financial Report Presentation and Disclosure' and AASB 1040 'Statement of Financial Position' for the first time in preparation of this financial report. In accordance with the requirements of these new/revised Standards, comparative amounts have been reclassified in order to comply with the new presentation format. The reclassification of comparative amounts has not resulted in a change to the aggregate amounts of current assets, non-current assets, current liabilities, non-current liabilities or equity, or the net profit/loss of the Economic Entity as reported in the prior year financial report. Economic Entity Note Half-Year Ended Half-Year Ended 2. profit/(loss) from ordinary activities 31 December 2001 31 December 2000 $ $ Net profit/(loss) has been arrived at after including: REVENUE FROM ORDINARY ACTIVITIES Profit on sale of assets 1,000 - Interest received or due and receivable from: Other persons 36,417 52,253 Foreign exchange gain 34,886 116,961 72,303 169,214 OPERATING EXPENSES Foreign exchange loss 78,304 - Depreciation - plant and equipment 6,941 910 3. contributed equity 30 June 31 December 2000 31 December 2001 2001 Fully Paid Ordinary Share Capital $ $ $ Balance at the beginning of the period 32,895,211 29,895,211 29,895,211 Issue of Fully Paid Ordinary Shares 7,750,486 3,000,000 - Share Issue Costs (1,381,538) - - Balance at the end of the period 39,264,159 32,895,211 29,895,211 On 21 December 2001, the Company successfully gained admission to the Alternative Investment Market of the London Stock Exchange, following the allotment of 45,000,000 ordinary fully paid shares, raising $7,750,486 in capital. Significant professional fees were incurred in this capital raising, which have been disclosed as share issue costs above. These costs are of a non-recurring nature. 4. contingent liabilities The details and estimated maximum amounts of contingent liabilities, classified according to the party from whom the contingent liability arises, are set out below. Economic Entity Half-Year Ended Half-Year Ended 31 December 2001 31 December 2000 $ $ (a) Benefits payable on termination in certain circumstances to directors under service agreements: Mr. S. El-Raghy 515,000 515,000 Mr. M. Kriewaldt 350,000 350,000 865,000 865,000 b. The minority shareholders of Pharaoh Gold Mines NL ('Pharaoh') have initiated proceedings against Pharaoh and the previous shareholders of Pharaoh. They allege that the previous shareholders of Pharaoh unfairly diluted their shareholding thereby causing them to suffer loss. The previous shareholders have vigorously defended this action, which has now been heard and is awaiting the decision of the Trial Judge. The Company's legal advice from Senior Counsel is that it has reasonable prospects of success. However at this stage it is not possible to quantify the likely impact any adverse judgment may have. 5. events subsequent to balance date There were no material events subsequent to balance date to report. 6. dual listing Following the admission of the Company to the Alternative Investment Market (AIM) of the London Stock Exchange on 21 December 2001, the Company now maintains a dual listing on both this market and the Australian Stock Exchange (ASX). Consequently, this report is to be lodged with both the ASX and AIM, and has been prepared in accordance with the Australian 'Corporations Act 2001' and the Australian Accounting Standard AASB 1029 'Half-Year Accounts and Consolidated Accounts'. 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