AusQuest Limited ABN Financial report for the half-year ended 31 December 2007 Prepared by:

Transcription

1 AusQuest Limited ABN Financial report for the half-year ended 31 December 2007 Prepared by:

2 Corporate Directory Board of Directors Mr John Innes Mr Graeme Drew Mr John Ashley Mr Greg Hancock Mr Chris Ellis Non-Executive Chairman Managing Director Executive Director Non-Executive Director Non-Executive Director Company Secretary Mr Darren Crawte Registered Office Level 2, 47 Colin Street WEST PERTH WA 6005 Principal Office 6 Kearns Crescent ARDROSS WA 6153 Telephone: (08) Facsimile: (08) Website : Auditors HLB Mann Judd 15 Rheola Street WEST PERTH WA 6005 Solicitors Pullinger Readhead Lucas Level 2, Fortescue House 50 Kings Park Road WEST PERTH WA 6005 Share Registry Advanced Share Registry Services Pty Ltd 110 Stirling Highway NEDLANDS WA 6009 Stock Exchange Listing Australian Securities Exchange (Home Exchange: Perth, Western Australia) Code: AQD/AQDOA

3 Financial report for the half-year ended 31 December 2007 Page Directors report 1 Auditor s independence declaration 4 Independent auditor s review report 5 Directors declaration 7 Condensed consolidated income statement 8 Condensed consolidated balance sheet 9 Condensed consolidated statement of changes in equity 10 Condensed consolidated cash flow statement 11 Notes to the condensed consolidated financial statements 12

4 Directors report The directors of AusQuest Limited submit herewith the financial report for the half-year ended 31 December In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: The names of the directors of the Company who have held office during and since the end of the half year are: Name John Innes Graeme Drew John Ashley Gregory Hancock Chris Ellis Directors have been in office for the entire half year unless otherwise noted. Review of operations HIGHLIGHTS High-grade manganese (47.5% Mn) intersected at Table Hill Potential for manganese mineralisation over large area (>18km²) Drilling to re-commence at Table Hill in June Quarter 2008 Major iron oxide-copper gold targets identified in west Queensland Drilling to commence in June Quarter 2008 Initial encouragement from Rocklea Iron test programme Strong financial position with $9 million to fund exploration SUMMARY During the half, AusQuest continued to progress exploration programs targeting a range of base, precious metal and bulk commodities as part of its core objective of discovering major deposits and new mineral provinces within Australia. The Company s 2007 exploration field season culminated with the discovery of significant high-grade manganese mineralization at the Table Hill Project in the East Pilbara region of Western Australia. During 2008 AusQuest s main exploration efforts will focus on drilling the Table Hill manganese project and testing several other targets within a portfolio of prospective tenements secured in this region. The Company will also drill test its iron oxide-copper gold project in western Queensland. MANGANESE The Company s focus on manganese exploration emerged late in 2007 as a result of an ore grade intersection ( % Mn) within the western Officer Basin sediments, at its Table Hill Project, located 200km east of Newman in Western Australia. This grade is similar to that at major manganese operations in Australia and South Africa, at both open cut and underground operations. Drill hole THD01, which intersected the high-grade manganese, was testing an extensive (>18km²) airborne electromagnetic (EM) target which is now thought to reflect the possible extent of the manganese mineralisation. Significantly, while the initial manganese intersection was at a depth of 286m, the EM target appears to become shallower to the north, where modelling suggests that the manganese mineralisation may lie at a depth of less than 100 metres

5 In light of these encouraging results, the Company has also re-interpreted the airborne EM data and identified several additional areas to both the north and east of the current drilling where the potential for further manganese mineralisation is considered to be high. An extensive drilling programme planned for 2008 will test the continuity and grade of manganese mineralisation up to 5km north of THD01, as well as several new target areas identified by the EM data. Following new tenement applications lodged during the half, AusQuest now controls approximately 7,000 km² of title in the Table Hill area. Several other new manganese exploration opportunities are also being considered by the Company s consultants in light of knowledge gained from the Table Hill drilling. Tenement applications have been submitted over several new areas in Western Australia which are subject to ongoing evaluation. COPPER AND GOLD As a result of exploration activities undertaken during the period, the Company identified the potential for Iron Oxide-Copper Gold (IOCG) mineralisation at the Diamantina Project, which is located approximately 450km south of Mt Isa in far-western Queensland. Gravity and magnetic data have defined several large-scale targets below the Eromanga Basin sediments which the Company believes may reflect IOCG mineralisation similar to that found at Olympic Dam in South Australia. The Diamantina Project is located along the southern margin of the Mt Isa Block, which hosts numerous base and precious metal deposits. Continental-scale structures which appear to form the bounding faults to the Mt Isa Block are interpreted to be closely associated with the targets identified for drilling. The Company controls approximately 2,900 km² of tenements in the area and is planning a major drilling campaign (2 deep drill-holes - 1,600m each) in 2008 to test two of the strongest gravity targets. Drilling contracts have been signed with pre-collar rotary-mud drilling scheduled to commence in April At the Plenty River and Mt Dobbie Projects, located ~250km east of Alice Springs in the Northern Territory, geophysical surveys have identified further gravity/magnetic targets that may represent copper-gold mineralising systems. Geological mapping and sampling followed by target drilling is planned for 2008 when a suitable drill rig becomes available in the area. No further work is planned at the Horsetrack Gold project south of Telfer in WA, where drilling failed to provide sufficient encouragement for exploration to continue. IRON ORE Test work designed to increase the iron grade and reduce contaminant levels for samples from the Rocklea channel iron prospect, located 40km west of Tom Price in the Pilbara region of Western Australia, commenced in late AusQuest engaged Promet Engineers to undertake the test work using core from drilling completed during the year. Preliminary results appear encouraging and a re-evaluation of the Rocklea prospect will be undertaken once all test results are available. The Company is also planning to complete test work on core samples collected from the Nameless channel iron prospect, located 5km north of Tom Price. The potential for Marra Mamba iron ore will also be evaluated in the Nameless area during NICKEL RC and diamond drilling programmes completed in 2007 tested selected nickel sulphide targets within the Company s portfolio of nickel-prospective projects in the Pilbara region of Western Australia. Disseminated Ni-Cu- PGE sulphides of high metal tenor were intersected at the Beasley and Bellary projects but no nickel sulphides were reported from drilling at Sylvania or Table Hill. At the Beasley Project, located 50km west of Tom Price in the Pilbara region of WA, drilling indicates that the sulphide content may be increasing down the inferred plunge of the target channel. This suggests that localised areas of thicker ultramafic host rock which have been interpreted down the plunge are priority targets for the next phase of drilling. Further test drilling is planned for the second half of

6 At Bellary, which is located 40km south of Beasley, anomalous PGEs (2 1.0g/t) plus Ni (0.35%) and Cu (660ppm) values were reported from a thin ultramafic flow unit at the Hardey prospect. Further work is planned to follow-up this occurrence and several targets identified within intrusive ultramafic rocks south of the current drill coverage. Drilling of selected targets is planned for Limited drilling completed at the Table Hill project in 2007 failed to intersect nickel sulphide mineralisation, but did provide new insight into the geology of the area which has led to the Company s consultants identifying further areas of interest for nickel exploration. This includes the Savory prospect, where a VTEM geophysical survey will be completed during the first half of 2008 to explore this area for massive nickel sulphide mineralisation. URANIUM The Company s uranium exploration programme at Sylvania, located 10km south of Newman in the east Pilbara region of Western Australia, is currently under review, given the lack of significant encouragement from the initial drilling programmes completed in PROJECT GENERATION The Company continues to review new project opportunities, both within Australia and offshore, to maintain a pipeline of quality projects either at, or close to, the drilling stage. Several new tenement areas have been acquired in Australia but to date no suitable offshore opportunities have been identified. A consultant has been employed to review potential offshore opportunities. CORPORATE The Company increased its cash reserve position at the end of 2007 to approximately $9.0 million through the completion of a Share Placement and a Share Purchase Plan (SPP). These funds will enable AusQuest to be more aggressive in its exploration programmes during 2008, especially at Table Hill where high-grade manganese was intersected in Auditor s independence declaration The auditor s independence declaration is included on page 4 and forms part of the directors report for the half year ended 31 December Signed in accordance with a resolution of directors made pursuant to s.306(3) of the Corporations Act On behalf of the Directors Graeme Drew Managing Director 11 March

7 Auditor s Independence Declaration As lead auditor for the review of the financial report of AusQuest Limited for the half-year ended 31 December 2007, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and b) any applicable code of professional conduct in relation to the review. This declaration is in respect of AusQuest Limited. Perth, Western Australia L DI GIALLONARDO 11 March 2008 Partner, HLB Mann Judd HLB Mann Judd (WA Partnership) ABN Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) Fax +61 (08) hlb@hlbwa.com.au. Website: Liability limited by a scheme approved under Professional Standards Legislation -4- HLB Mann Judd (WA Partnership) is a member of International and the HLB Mann Judd National Association of independent accounting firms

8 INDEPENDENT AUDITOR S REVIEW REPORT To the members of AUSQUEST LIMITED Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report, which comprises the condensed balance sheet as at 31 December 2007, the condensed income statement, condensed statement of changes in equity, condensed cash flow statement and notes to the financial statements for the half-year ended on that date, and the directors declaration, of AusQuest Limited and the entities it controlled during the half-year ended 31 December 2007 ( consolidated entity ). Directors Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001, including giving a true and fair view of the consolidated entity s financial position as at 31 December 2007 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of AusQuest Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. HLB Mann Judd (WA Partnership) ABN Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) Fax +61 (08) hlb@hlbwa.com.au. Website: Liability limited by a scheme approved under Professional Standards Legislation -5- HLB Mann Judd (WA Partnership) is a member of International and the HLB Mann Judd National Association of independent accounting firms

9 Independent Auditor s Review Report Independence In conducting our review, we have complied with the independence requirements of the Corporations Act We confirm that the independence declaration required by the Corporations Act 2001 has been provided to the directors of AusQuest Limited on 11 March Conclusion 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 AusQuest Limited is not in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the consolidated entity s financial position at 31 December 2007 and of its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations HLB MANN JUDD Chartered Accountants Perth, Western Australia L DI GIALLONARDO 11 March 2008 Partner -6-

10 Directors declaration The directors declare that: (a) (b) 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; and in the directors opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company. Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act On behalf of the Directors Graeme Drew Managing Director 11 March

11 Condensed consolidated income statement for the half-year ended 31 December 2007 Half-year ended 31 Dec 2007 $ Consolidated Half-year ended 31 Dec 2006 $ Note Revenue 2 180, ,181 Consultants & employee benefits expense (145,690) (530,049) Occupancy expenses (35,954) (35,503) Administrative expenses (284,348) (205,757) Exploration expenditure written off (749,206) - Other expenses - (5,652) Loss before income tax expense (1,034,288) (624,780) Income tax expense - - Loss for the period (1,034,288) (624,780) Loss per share: Basic (cents per share) Diluted earnings per share is not disclosed as the consolidated entity incurred a loss in the current period and the options on issue are not deemed to be dilutive. Notes to the financial statements are included on pages 12 to

12 Condensed consolidated balance sheet as at 31 December Dec 2007 $ Consolidated 30 June 2007 $ Note Current assets Cash and cash equivalents 8,455,041 6,809,923 Trade and other receivables 255, ,411 Total current assets 8,710,850 7,083,334 Non-current assets Other financial assets 78,000 70,000 Property, plant and equipment 62,385 73,562 Exploration, evaluation and development 10,858,430 8,486,991 Total non-current assets 10,998,815 8,630,553 Total assets 19,709,665 15,713,887 Current liabilities Trade and other payables 173, ,737 Borrowings 419, ,766 Total current liabilities 592, ,503 Total liabilities 592, ,503 Net assets 19,116,709 14,989,384 Equity Issued capital 4 19,199,863 17,106,288 Share application proceeds 4 2,981,806 - Reserves 4 677, ,596 Accumulated losses (3,742,788) (2,708,500) Total equity 19,116,709 14,989,384 Notes to the financial statements are included on pages 12 to

13 Condensed consolidated statement of changes in equity for the half year ended 31 December 2007 Consolidated Note $ $ Total equity at the beginning of the period 14,989,384 8,363,132 Loss for the period (1,034,288) (624,780) Total recognised income and expense for the period 13,955,096 7,738,352 Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs 4 5,075,381 6,745,975 Share based payments 4 86, ,796 5,161,613 7,212,771 Total equity at the end of the period 19,116,709 14,951,123 Notes to the financial statements are included on pages 12 to

14 Condensed consolidated cash flow statement for the half-year ended 31 December 2007 Cash flows from operating activities Note Half-year ended 31 Dec 2007 $ Consolidated Half-year ended 31 Dec 2006 $ Payments to suppliers and employees (389,811) (347,660) Interest received 290,646 77,851 Reimbursement of expenses - 54,330 Net cash used in operating activities (99,165) (215,479) Cash flows from investing activities Payment for property, plant and equipment - (2,966) Payment for exploration and evaluation expenditure (3,120,645) (1,064,845) Proceeds from sale of exploration assets - 20,000 Net cash used in investing activities (3,120,645) (1,047,811) Cash flows from financing activities Proceeds from issues of equity securities 2,385,816 6,745,975 Payment for share issue costs (292,241) - Proceeds from share applications 3 2,981,806 - Payment for other financial assets (78,000) - Net cash provided by financing activities 4,997,381 6,745,975 Net increase in cash and cash equivalents 1,777,571 5,482,685 Cash and cash equivalents at the beginning of the half-year 6,258,157 2,590,505 Cash and cash equivalents at the end of the half-year 8,035,728 8,073,190 Cash and cash equivalents in the condensed consolidated cash flow statement comprises: Cash and cash equivalents 8,455,041 8,073,190 Bank overdrafts (419,313) - 8,035,728 8,073,

15 Notes to the condensed consolidated financial statements for the half-year ended 31 December Accounting policies Statement of Compliance The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half-year financial report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report. Basis of Preparation The condensed financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company s annual financial report for the financial year ended 30 June 2007: Adoption of new and revised Accounting Standards In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July The adoption of these new and revised Standards and Interpretations has resulted in no changes to the Group s accounting policies. 2. Revenue 2007 $ 2006 $ Interest received 180,910 77,851 Share of exploration expenditure contribution - 54,330 Sale of rights - 20, , , Subsequent events On 8 January 2008, the Company issued 10,667,178 ordinary fully paid shares at 28 cents per share pursuant to the Share Purchase Plan. $2,981,806 was received by 31 December 2007 prior to the shares being issued and has been disclosed as share application proceeds on the balance sheet. On 8 January 2008, the Company also issued 5,333,589 free attaching listed AQDOA options pursuant to the Share Purchase Plan. The listed options are exercisable at 20 cents and expire 30 November On 25 January 2008, the Company issued 2,339,286 ordinary fully paid shares at 28 cents to Directors pursuant to the receipt of shareholder approval at an EGM held on 17 January

16 3. Subsequent events (Cont.) On 25 January 2008, the Company also issued 1,169,643 free attaching listed AQDOA options to Directors pursuant to the receipt of shareholder approval at an EGM held on 17 January The listed options are exercisable at 20 cents and expire 30 November On 31 January 2008, the Company issued 20,032 ordinary fully paid shares at 20 cents per share pursuant to the exercise of 20,032 listed options exercisable at 20 cents on or before 30 November On 6 February 2008, the Company issued 8,928 ordinary fully paid shares at 20 cents per share pursuant to the exercise of 8,928 listed options exercisable at 20 cents on or before 30 November Issuances, repurchases and repayments of securities Fully paid ordinary shares: 31 December December 2006 No. $ No. $ Balance at beginning of period 125,183,928 17,106,288 77,457,692 10,248,825 Exercise of options ,839,172 4,167,834 Placement ,000,000 3,000,000 Bonus issue ,329,686 - Placement 7,535,714 2,110, Exercise of listed options 299,081 59, Exercise of unlisted options 1,080, , Share Purchase Plan - 2,981, Share issue costs - (292,241) - (421,859) Balance at end of period 134,098,723 22,181, ,626,550 16,994,800 Option reserve: 31 Dec Dec 2006 $ $ Balance at beginning of period 591, ,800 Remuneration options (i) 86, ,796 Balance at end of period 677, ,596 (i) Further details on options granted during the period are shown in note Related parties Arrangements with related parties continue to be in place. For details of these arrangements, please refer to the 30 June 2007 annual financial report. Key management personnel continue to receive compensation in the form of short term employee benefits, post employment benefits and share based payments. On 1 August 2007, 500,000 unlisted options were issued to key management personnel and were valued at $86,231. The options were valued using a Black & Scholes model with the following inputs: Grant date 1 August 2007 Expiry date 31 January 2012 Underlying share price 22 cents Exercise price 30 cents Expected share price volatility 113% Risk free interest rate 6.185% - 13-