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Silver Mines LSE: SVLP |
Sep 30, 2008 09:14 ET
Final Results
SILVER MINES LIMITED
DIRECTORS' REPORT
The Directors present their report on the Company for the year ended 30 June 2008.
Directors
The Directors of Silver Mines Limited during the financial year and until the date of this report
are:
David Henty Sutton (Non Executive Director -Chairman)
John Morgan Edwin Percival (Non Executive Director) (Resigned 26 October 2007)
Kim Austen Slater (Non Executive Director)
David John Straw (Non Executive Director)
Malcolm Harvey Bird (Non Executive Director)
Principal Activities
The principal activities of the Company during the financial year were the continued exploration
in the New England Project areas, surface exploration on the Company's exploration licences
surrounding our New England projects, acquisition of and joint venturing into additional
significant silver exploration areas.
The Company attained a major goal in its successful progress towards becoming a miner with the
release of its first resource statement showing a Global Inferred Resource estimate of 4.5 million
ounces of silver at the Webbs Silver Project in north-eastern NSW.
* This estimate is by highly respected independent consultants Hellman and Schofield Pty
Ltd.
* Their conclusion is that the resource estimate supports the Company's view that there is
real potential for a mining operation to be developed on the Company's 100% owned tenement
(EL5674).
* Their modelling estimates inferred resources to a depth of only 200m, from the surface and
suggests that the Webbs Silver South resource may be amenable to open cut mining for the upper
portion.
* The final depth of any potential open cut mining is yet to be determined.
* High values of copper, zinc and lead are closely associated with silver mineralisation and
extraction of silver by proposed metallurgical methods should extract significant amounts of the
associated metals.
The resource estimate provides valuable and encouraging support to the Company's interpretation of
the Webbs Project and its potential for both hosting silver-rich mineralisation but more
importantly for developing a mine. This interpretation has been developed over the past two years
and is based on sound technical work - drilling and field work (ground geophysics, surface
geochemistry, geological mapping) completed to date.
The resource estimates calculated are summarised below in Table 1. The Global estimate includes
the Webbs Silver South estimate.
Webbs Silver Project Global Inferred Resource
Cutoff Value1 Tonnes Ag ppm Cu ppm Zn ppm Pb ppm
$US
50 670,000 210 1900 12000 5000
Our interpretation of the project is that a north-south trending mineralised envelope exists over
a strike length of approximately 2,000m with the historic Webbs Silver Mine located in the
northern third. The envelope is up to 15 metres wide in places and contains a series of higher
grade silver-rich polymetallic veins up to five metres wide and up to 100 metres long and at least
250 metres deep from the surface - as is the case at the Webbs Silver Mine. These higher grade
lodes have been the primary target for the exploration to date.
Our exploration team has successfully demonstrated that the interpretation is valid and have thus
far delineated eight high priority targets within the mineralised envelope. Of these eight targets
only four have been drilled by us and silver-rich polymetallic mineralisation has been intersected
in all four. The product of this drilling is an Inferred Resource estimate for the four targets as
shown above in Table 1
This is an excellent result and demonstrates not only that our team has a successful targeting
strategy but also demonstrates that the project is showing all the signs of a potential mine.
Our business aim is to translate the successful activities in the 20 months since your Company
listed on the ASX in January 2007 into developing a small-scale mining operation as rapidly as
possible. We are well down the track towards achieving this objective.
We now have completed the two most important parts of the Scoping Study:
* The resource estimate and
* The sighter metallurgical testwork.
The encouraging results for both these components means that the next stage can now be started
which includes;
* Open pit mine design at Webbs Silver South,
* Process plant design and location,
* Infrastructure requirements (water, power, waster management etc),
* Capital Expenditure (CAPEX) and
* Operational Expenditures (OPEX) estimates.
This work has begun with the engagement of Lycopodium Engineering Queensland as lead consultant
and is expected to be completed in 10 to12 weeks.
We are also planning to carry out further drilling programs on the Webbs Silver Project prospect
with a view to increasing the resource inventory estimates at and to take them to a higher
category.
Your Board and Executive Team have a clear focus and philosophy. Our fundamental approach is to
concentrate on bringing a small-scale mining operation into fruition - establishing early cash
flow - and not dissipate your Company's financial resources into extraneous exploration outside
our direct needs at this stage of our development.
This has been our attitude from the outset and is certainly a mindset which is all the more
important amid the current market sentiments.
Developing a low-cost mining operation will provide cash flow to support our further growth and
development which in the context of our overall vision is to remain committed to concentrating on
identifying and developing small, high-grade silver projects and through that create a successful
economic mineral business.
Our move into the highly prospective tenement in Tasmania (EL 20/2008) is an example of this
consistent approach to identify and acquire projects with similar scope and potential as the Webbs
Silver Project. This tenement includes lead-zinc-silver vein systems, copper and copper-gold. A
comprehensive exploration program on this project is scheduled to begin by October 2008.
At the same time as further support for the Company's long-term growth strategy the Company has
successfully been admitted to the PLUS-quoted Market in London in a move designed to heighten
awareness of our operations and broaden our investor base. Currently there are 17 other mining
companies and a total of 18 non-UK Companies quoted on PLUS, which is the new independent stock
exchange for small and mid-cap companies.
Results
The Company incurred a pre-tax operating loss of $546,480 (2007: loss $307,742).
Dividends
No dividend has been paid since the end of the previous financial year and no dividend is
recommended for the current year, (2007 - nil).
Review of Operations
The comprehensive review of operations is covered in the General Managers Report that accompanies
these accounts.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs in the Company during the year other
than the Admission of the Company on the Plus Market on 30 June 2008.
Subsequent Events
There were no significant events after balance date other than:
* Initiated a Share Purchase Plan in August 2008. The funds will be used to continue
exploration and development on the Company's New England Tenements, and
* the announcement of the Company first resource estimate.
.
Events subsequent to reporting date
There has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely, in the opinion of
the Directors of the Company, to affect significantly the operations of the Company, the results
of those operations, or the state of affairs of the Company in future financial years, other than
Share Purchase Plan initiated in August 2008. The funds will used to continue exploration and
development on the Company's New England Tenements.
.
Likely developments
Information on likely developments is included in the Chairman's Report accompanying this
financial report.
Further information about likely developments in the operations of the Company and the expected
results of those operations in future financial years has not been included in this report because
disclosure of the information would be likely to result in unreasonable prejudice to the Company.
Environmental Issues
The Company's Project Areas are located on exploration licences issued by the Department of
Mineral Resources and operate under an environmental licence issued by the Environmental
Protection Authority.
These licences require the preparation of an annual Environmental Management Report and a Mining
Operations Plan.
The Company had statutory obligations to protect the environment in which it was exploring.
During the reporting period the Company did not fail to meet its obligations pursuant to any
environmental legislation.
Information on Directors
David Henty Sutton, Non-Executive Chairman
David has many years experience in stock broking and investment banking. Since 2002 he has been
Executive Chairman of Martin Place Securities Pty Ltd, a boutique investment firm holding an AFS
Licence, where his responsibilities include management of corporate finance, advisory and share
broking facilities within the firm. Martin Place Securities Pty Ltd provides services in corporate
advisory, stock broking, and investment research, with particular emphasis on the resources and
energy sectors.
Prior to his current role David was a partner and Director of several Australian Stock Exchange
firms including Clarke & Co, McNab Clarke and more recently, a Director of TA Securities, Hudson
Securities and Terrain Securities. He became a member of the Stock Exchange of Melbourne and
subsequently of the Australian Stock Exchange Limited.
His past experience of directorships of public companies includes the Hudson Group of Companies,
Fleet Capital Limited and Waivcom International Ltd. His experience of Directorships of companies
in the resources sector include, Chairman of Reef Mining Limited, (a listed gold producer) and
Director of Imperial Corporation Ltd., (a company producing natural gas in the United States).
Other listed company directorships held during past 3 years:
Sinovus Mining Limited
Imperial Corporation Ltd
Reef Mining Limited
David John Straw, Non-Executive Director
David Straw is a geologist with extensive experience in all phases of mineral exploration, project
development, joint ventures, mine development, production, valuation and finance, across most
commodities including silver, gold, tin, tungsten, base metals, iron ore, mineral sands, uranium,
asbestos and coal. He has wide experience with companies, governments and individuals. He also has
an intimate knowledge of all levels of corporate administration. His global experience includes,
but is not limited to, Australia, Canada, USA, Mexico, Africa (South, West and Central), Europe
and South-East Asia.
David has held a broad range of technical, managerial and advisory positions through his career to
both small and large exploration and mining companies as well as governments.
Selected highlights from his career include; Chief Geologist at Canadian Johns-Manville Co. Ltd.,
Director of Yerranderie Silver Limited and of Mareeba Mining and Exploration Limited. He also has
held various positions including Vice President Exploration, Vice President Mineral Development
and Directors of Inco Australia and Inco Indonesia. He was Deputy Managing Director of merchant
bank Westralian International, and a Director of Robe River Ltd. He has held various positions
form Operations Manager to General Manager Corporate Development of Mount Isa Mines and Director
of various subsidiaries. At BMI Limited he held various positions including General Manager and
Director of mining subsidiaries.
Other listed company directorships held during past 3 years:
Arthur Resources Corp
Tearlach Resources Ltd
Kim Austen Slater, Non-Executive Director:
Kim Slater has over 25 years experience in senior executive roles within the banking and financial
services industry. Over this time he has provided specialist advice on structured products,
hybrids, fixed interest, and equity derivative products to the Board and executives of major
public and private institutions. He has held positions with County Natwest, Deustche Bank, and
Salomon Smith Barney. His background in derivatives led him to being involved in many large
corporate transactions, breaking new ground in the use of derivatives in takeovers and corporate
finance.
More recently Kim operates an independent boutique advisory practice that specialises in providing
strategic advice and corporate guidance to Boards and senior executives of ASX-listed companies.
His experience in successfully driving development and executing strategy combined with the
experience and knowledge of owning and operating his own small business, give a useful and varied
perspective to the strategic aspirations of Silver Mines Ltd.
Other listed company directorships held during past 3 years:
Mobile Soft Limited
Malcolm Harvey Bird, Non Executive Director
Malcolm Bird has over 35 years experience in the stock broking industry with an emphasis on mining
investments. He is currently a Director of Morning Star Gold NL and has been on the Board of
Central West Gold NL since its creation 17 years ago.
Other listed company directorships held during past 3 years:
Morning Star Gold NL
Central West Gold NL
Company Secretary
Kevin Lynn B.Bus, CA, FAIDC, FFin
Mr Lynn is a Chartered Accountant with over 20 years corporate and finance and is also Company
Secretary to several listed companies.
Remuneration Report
Remuneration policy
The remuneration policy of Silver Mines Limited has been designed to align director and
executive objectives with shareholder and business objectives by providing a fixed remuneration
component and offering specific long term incentives based on key performance indicators
affecting the Company's financial results. The Board of Silver Mines Limited believes the
remuneration policy to be appropriate and effective in its ability to attract and retain the
best executives and directors to run and manage the Company.
The Board's policy for determining the nature and amount of remuneration for Board members and
senior executives of the Company is as follows:
The remuneration policy, setting the terms and conditions for the executive Directors and other
senior executives, was developed by the Board. All executives receive a base salary (which is
based on factors such as length of service and experience) and superannuation. The Board
reviews executive packages annually by reference to the Company's performance, executive
performance and comparable information from industry sectors and other listed companies in
similar industries.
The Board may exercise discretion in relation to approving incentives, bonuses and options. The
policy is designed to attract the highest calibre of executives and reward them for performance
that results in long term growth in shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive Directors and executives receive a superannuation guarantee contribution required
by the government, which is currently 9%, and do not receive any other retirement benefits.
All remuneration paid to Directors and executives is valued at the cost to the Company and
expensed. Options are valued using the Black & Scholes methodology.
The Board policy is to remunerate Non Executive Directors at market rates for comparable
companies for time, commitment and responsibilities. The Board determines payments to the Non
Executive Directors and reviews their remuneration annually, based on market practice, duties
and accountability. Independent external advice is sought when required. The maximum aggregate
amount of fees that can be paid to Non Executive Directors is subject to approval by
shareholders at the Annual General Meeting (currently $250,000). Fees for Non Executive
Directors are not linked to the performance of the Company. However, to align Directors'
interests with shareholder interests, the Directors are encouraged to hold shares in the
Company and are able to participate in employee option plans.
Performance based remuneration
The Company currently has no performance based remuneration component built into the General
Managers executive remuneration package.
Company performance, shareholder wealth and Directors' and executives' remuneration
The remuneration policy has been tailored to increase goal congruence between shareholders and
Directors and executives. Currently, this is facilitated through the issue of options to the
majority of Directors and executives to encourage the alignment of personal and shareholder
interests. The Company believes this policy will be effective in increasing shareholder wealth.
At commencement of mine production, performance based bonuses based on key performance
indicators are expected to be introduced. For details of Directors' and executives' interests
in options at year end, refer note 15 of the financial statements.
The Directors have set the base fees payable as follows -
Non-executive Chairman $30,000 per annum
Non-executive Directors $30,000 per annum
Audit Committee members $Nil per annum
In addition to the fees above, the Company makes compulsory superannuation contributions on
behalf of each Director in accordance with the Superannuation Guarantee Act. The Company does
not have any schemes for retirement benefits for Non-Executive Directors.
Service Agreements
There are no other service agreements.
Director remuneration for the year ended 30 June 2008
Salary Non Super- Retirement Equity Other Total
& Fees Monetary annuation benefits Options Bonuses
D Sutton
2008 30,000 - - 30,000
2007 15,000 20,115 35,115
D Straw
2008 30,000 - - 30,000
2007 15,000 20,115 35,115
J Percival
2008 7,984 - - 7,984
2007 15,000 - - 35,115
K Slater - -
2008 30,000 - 30,000
2007 15,000 - 20,115 35,115
M Bird
2008 30,000 - - 30,000
2007 15,000 - 20,115 35,115
Remuneration of the 5 named executives who receive the highest remuneration for the year ended 30
June 2008
Salary Non Super- Retirement Equity Other Total
& Fees Monetary annuation benefits Options
Bonuses
K Lynn 36,000 - - - 36,000
2008 - -
2007 36,000 - - 20,115 - 56,115
C Straw
2008 154,505 - 13,905 - 25,000 193,410
2007 148,665 - 13,380 - 182,160
Options granted as part of remuneration
No options were issued to Directors or executives as part of their remuneration for the year, (2007:
3,500,000). For details of Directors and executives interests in options at year end, refer note
15 of the financial statements.
Performance Income as a proportion of total remuneration
General Manager, Mr Charles Straw received a bonus of $25,000, part of which was taken as shares in
the Company. No performance based bonuses have been paid to Directors during the financial year.
It is the intent of the Board to include performance bonuses as part of remuneration packages when
mine production commences.
Meetings of Directors
The following table sets out the number of meetings of the Company's Directors during the year
ended 30 June 2008 and the number of meetings attended by each Director.
Name Board Meetings
Eligible Attended
D Sutton 6 6
M Bird 6 6
D Straw 6 -
K Slater 6 6
C Straw as Alternate Director for D Straw - 6
In light of the current activities and size of then Company, it is not presently considered
necessary for a separate Audit and Remuneration Committees of the Board. No Audit, Remuneration or
Nomination and Remuneration Committee Meetings were held during the year, with all relevant
matters being considered by the full Board of Directors. This situation will be kept under
constant review by the Board.
Shares and Options
During the year the Company did not issue any new Shares or Options.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the
Directors support and have adhered to the principles of corporate governance. The Company's
corporate governance statement follows the financial report.
Non-Audit Services
The Company engages the services of its auditor, Graham Abbott Associates, on other assignments in
addition to their statutory audit duties where the firm's expertise and experience with the
Company are beneficial. Non-audit services to be undertaken by the auditor are referred to the
Chairman of the Audit Committee for approval where the fees are expected to exceed $10,000.
The Board of Directors has considered the level and nature of non-audit services provided by the
auditor during the year and, in accordance with the advice received from the Audit Committee, is
satisfied that the provision of the non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that
the nature and scope of each type of non-audit service provided by the auditor did not compromise
the auditor independence requirements of the Corporations Act 2001. Details of the amounts paid or
payable to the auditor for audit and non-audit services provided during the year are set out
below.
2008 2007
$ $
Audit services:
Remuneration for audit and review of financial reports under the 16,950 25,100
Corporations Act 2001
Other assurance services:
Independent Accountants Report - UK Plus Listing 5,930 -
Review of prospectuses issued during year - 11,750
Total auditor's remuneration 22,880 36,850
Directors and Officers Indemnification
During the financial year Silver Mines Limited paid premiums of $29,051 to insure the Directors
and Officers of the Company.
The Company has agreed to indemnify and keep indemnified the Directors and Officers of the
Company against all liabilities incurred by the Directors or Officers as a Director or Officer
of the Company and all legal expenses incurred by the Directors or Officers as a Director or
Officer of the Company.
The indemnity only applies to the extent and in the amount that the Directors or Officers are
not indemnified under any other indemnity, including an indemnity contained in any insurance
policy taken out by the Company, under the general law or otherwise.
The indemnity does not extend to any liability:
* to the Company or a related body corporate of the Company; or
* arising out of conduct of the Directors or Officers involving a lack of good faith; or
* which was incurred prior to 1 February 1996 and which is in respect of any negligence,
default, breach of duty or breach of trust of which the Directors or Officers may be guilty in
relation to the Company or related body corporate.
Auditor's Independence Declaration
A copy of the auditor's independence declaration as required under Section 307C of the
Corporations Act is set out on page 11 and forms part of the Director's Report.
This report is made in accordance with a resolution of the Directors.
Malcolm Bird Kim Slater
Director Director
25 September 2008
AUDITOR'S INDEPENDENCE DECLARATION
Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 to the
Directors of Silver Mines Limited
I declare that, to the best of my knowledge and belief, in relation to our review of Silver Mines
Limited for the year ended 30 June 2008 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the
review.
Graham Abbott - Principal
Graham Abbott Associates
Chartered Accountants
Dated 25 September 2008.
Sydney, Australia.
SILVER MINES LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2008
Notes 2008 2007
$ $
Revenues from ordinary activities 2 219,341 122,256
Expenses from ordinary activities
- Accounting/ company secretarial (36,000) (36,000)
- Wages (195,873) (73,491)
- Share registry (26,656) (3,615)
- Stock exchange fees (15,823) (4,532)
- Bank fees (2,003) (1,420)
- Auditors (22,880) (25,100)
- Directors emoluments (127,984) (75,000)
- Office expenses (6,952) (7,663)
- Occupational health & safety (621) (11,739)
- IT & communications (19,297) (11,308)
- Rent (33,529) (44,988)
- Depreciation (39,529) (5,888)
- Insurance (31,763) (32,240)
- Professional advisors (85,753) -
- Other expenses from ordinary activities (120,918) (49,659)
Loss from ordinary activities before income tax 3 (546,480) (260,387)
expense
Income tax expense 4 - -
Loss from ordinary activities after income tax (546,480) (260,387)
expense
Cents Cents
Basic earnings per share 21 (0.01) (0.01)
Diluted earnings per share 21 (0.01) (0.01)
SILVER MINES LIMITED
BALANCE SHEET
AS AT 30 JUNE 2008
Notes 2008 2007
$ $
Current Assets
Cash and cash equivalents 5 1,491,991 4,443,826
Receivables 6 150,783 159,516
Total Current Assets 1,642,774 4,603,342
Non-Current Assets
Other financial assets 7 110,550 50,000
Intangible assets
- Deferred exploration & development 8 3,193,474 898,317
Property plant & equipment 9 188,031 15,203
Total Non-Current Assets 3,492,055 963,520
Total Assets 5,134,829 5,566,862
Current Liabilities
Payables 10 284,061 255,959
Provisions 11 4,307 5,664
Total Current Liabilities 288,368 261,623
Non Current Liabilities
Payables 10 129,283 -
Total Non Current Liabilities 129,283 -
417,651 261,623
Total Liabilities
Net Assets 4,717,178 5,305,239
Equity
Contributed equity 12 5,571,400 5,612,981
Accumulated losses 13 (854,222) (307,742)
Total Equity 4,717,178 5,305,239
SILVER MINES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
Notes Ordinary Retained Total
Shares Earnings
$ $ $
Balance at 1 July 2006 5 (47,355) (47,350)
- - -
Shares Issued during the year 6,353,600 - 6,353,600
Costs of funds raised (740,624) - (740,624)
Loss attributable to members of the Company - (260,387) (260,387)
Balance at 30 June 2007 5,612,981 (307,742) 5,305,239
Shares Issued during the year - - -
Costs of funds raised (41,581) - (41,581)
Loss attributable to members of the Company - (546,480) (546,480)
Balance at 30 June 2008 5,571,400 (854,222) 4,717,178
SILVER MINES LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2008
Notes 2008 2007
$ $
Cash Flows From Operating Activities
Interest received 219,341 122,256
Payments to suppliers and employees (690,815) (301,881)
Net cash outflows from operating activities 18 (471,474) (179,625)
Cash Flows From Investing Activities
Exploration bonds (60,550) (50,000)
Property plant & equipment (212,356) (21,092)
Exploration expenditure (2,295,157) (898,217)
Net cash outflows from investing activities (2,568,063) (969,409)
Cash Flows From Financing Activities
Proceeds from the issue of shares - 4,923,126
Fund raising costs (41,581) -
Borrowings - finance leases 129,283 -
Net cash inflows from financing activities 87,702 4,923,126
Net Increase in Cash Held (2,951,835) 3,774,093
Cash at the Beginning of the Financial Year 4,443,826 669,733
Cash at the End of the Financial Year 5 1,491,991 4,443,826
The full accounts can be found at www.silverminesltd.com.au
FOR FURTHER INFORMATION PLEASE CONTACT:
Silver Mines Limited
Charles Straw
CEO
+61 2 9455 0280
Email: cstraw@silverminesltd.com.au
PLUS Corporate Adviser
Loeb Aron & Co Ltd.
Peter Freeman
+44 207 620 1128
ENDS
For more information, please contact
Silver Mines