SILVER MINES LIMITED
ACN 107 452 942
STATUTORY REPORT
30 JUNE 2012
Contents
Page
Directors' Report 2
Auditor's Independence Declaration 14
Statement of Comprehensive Income 15
Statement of Financial Position 16
Statement of Changes in Equity 17
Statement of Cash Flows 18
Notes to the Financial Statements 19
Directors' Declaration 40
Independent Audit Report 41
Corporate Directory 43
SILVER MINES LIMITED
DIRECTORS' REPORT
The Directors present their report on the Company for the year ended 30 June 2012.
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
Malcolm Harvey Bird - Non Executive Director
Charles David Straw - Managing Director
Principal Activities
During the 12 months to 30 June 2012 Silver Mines Limited continued to aggressively explore its NSW tenements (Map
1). The majority of work and expenditure again focused on the 100% owned Webb's Silver Project on EL5674. Results
from all projects, in particular Webbs, continue to add value to our property portfolio of silver focused projects
in NSW with many new drilling targets defined.
Highlights for 2012 Financial Year
* SVL announced a 400% upgrade of its Indicated and Measured JORC resource at Webbs to 969,000 tonnes
averaging 269 g/t Ag for a contained resource of 8.45 million ounces of silver at its fully-owned Webbs silver
project in north-eastern NSW. Additional inferred resources of 3.4 million ounces of silver also exist.
Table 1: Resource estimate for Webb's Silver Project at 70g/t Ag cut-off.
http://media3.marketwire.com/docs/SILVERA.jpg
- Updated geological model of Webbs shows excellent potential for substantial increase in resource inventory
down dip.
- Strike extensions to the south of Webbs South remain un-tested by drilling as well as other near surface
gaps in the current drill pattern.
* Positive results from flotation and Albion Process(TM) testwork at Webbs which demonstrated excellent
potential to recover over 90% of silver to dore bars as:
- 96% Ag is recovered to flotation concentrate and 98% Ag recovered via cyanide leach after Albion Process(TM).
Silver then recovered to dore through Merrill-Crowe process.
- Potential to recover base metals (zinc, copper and lead) to be investigated.
- Further test work is underway.
* Completion of 2232.5m of diamond drilling (DDH) in 19 holes and 7996m of reverse circulation (RC) drilling
in 98 holes.
Webbs Silver Project (EL5674)
During the financial year ending 30 June 2012, SVL completed a number of drilling programs totalling 2232.5m of
diamond drilling (DDH) in 19 holes and 7996m of reverse circulation (RC) drilling in 98 holes. The new drilling was
again highly successful in delineating additional high grade silver rich polymetallic mineralisation in the Webbs
trend. This drilling delivered a 400% upgrade of Indicated and Measured JORC resources to 969,000 tonnes averaging
269 g/t Ag for a contained resource of 8.45 million ounces of silver. This result reconfirmed Webbs position as the
highest grade undeveloped silver project in Australia.
The current resource estimate at Webbs is 1.49Mt averaging 245 g/t Ag, 0.27% Cu, 0.71% Pb and 1.56% Zn which
contains approximately 11.75Moz, including measured and indicated resources of 8.4Moz of silver at 269 g/t Ag.
Metallurgy
Metallurgical testwork carried out in early 2012 indicates that silver recoveries of over 90% to dore bars were
likely to be attained from an onsite processing facility. The metallurgical testwork has successfully recovered 96%
silver via flotation with 98% subsequent recovery via cyanide leach from the Albion Process(TM). Silver is then
recovered to dore through the traditional Merrill-Crowe process. This results in total silver recovery of around
90%.
Silver Mines has engaged Mineralurgy Pty Ltd to oversee a metallurgical testwork program for the Webbs Silver
Project. Mineralurgy is a world recognised metallurgical consultancy, with particular expertise on complex
polymetallic projects in Australia and overseas. Mineralurgy conducted a review of metallurgical data related to the
Webbs project, including testwork conducted by Silver Mines and previous explorers. Based upon this review the flow
sheet decided upon for testing was; produce a bulk sulphide concentrate for further processing to extract silver to
dore using the Albion Process(TM) and possibly produce Zn and Cu concentrates.
This current testwork program has utilised the following key phases:
1. Following on from sighter flotation testwork a bulk sulphide flotation concentrate was produced at the
relatively coarse grind of 212 microns. This recovered 95.9% of the silver to a 12% mass pull (ASX news release 31st
May 2012) which assayed 2.2 kg/t Ag and also recovered appreciable amounts of Cu, Zn and Pb.
2. The bulk concentrate was then subjected to the Albion Process TM which consists of ultra-fine grinding down
to a product size of 80% passing 8-12 microns followed by oxidative alkaline leaching.
3. The Albion leach residue was then treated with conventional cyanidation. Cyanide soluble silver analysis
showed 98.4% recovery of Ag.
4. This testwork results in total silver recovery of 94.3% into cyanide solution.
Recovery of silver into dore from the cyanide solution has not been investigated as yet, however the well recognised
Merrill-Crowe process is currently favoured which, based on many commercial applications SVL would expect to recover
over 95% of the silver from the silver cyanide solution, thus delivering greater than 90% silver recovery overall to
dore bars.
These results have the potential to be a major step for the Webbs Silver project. Once the test work is completed,
Core Resources will prepare capital and operating cost estimates to Scoping Study level to evaluate a 500,000 tonne
per year processing facility, capable of producing up to 4Moz of silver per annum.
Test work is ongoing and results will be reported as they come to hand. However, at this stage all indications are
very positive that a potentially economic metallurgical flow sheet utilising the Albion Process(TM) to produce silver
dore is taking shape.
The Webbs project continues to deliver with drilling during the year again providing further exciting results
demonstrating the potential of the project to grow. The Company has a defined exploration target extending to
350 below surface. Initial testing of this target has focussed on near surface potential down to 250m below
surface, in and around the current resource and along strike to the north and south. Many high grade zones along the
Webbs trend remain open at depth.
Drilling
During the year the Company drilled at total of 10228.5 m of RC and DDH drilling in 117 holes. Drilling results to
date provide the following results:
-----------------------------------------------------------------------------------------
HoleID from to (m) Interval Ag (g/t) Cu (%) Pb (%) Zn (%)
(m) (m)
-----------------------------------------------------------------------------------------
DDH016 62 66 4.00 326 0.30 0.57 3.32
DDH016 83 97 14.00 1705 0.58 0.70 4.73
DDH017 169.76 183 13.24 506 0.41 0.12 4.53
DDH017 186.15 195.67 9.52 210 0.22 0.25 1.64
DDH018 80.76 85.4 4.64 503 0.40 0.29 2.50
DDH019 40.7 48 7.30 536 0.40 2.05 3.44
DDH020 83 98 15.00 142 0.15 0.72 3.29
DDH021 26 27 1.00 1130 0.46 1.50 1.52
DDH022 30 47.4 17.40 191 0.18 0.45 1.42
DDH026 49.25 55.70 6.45 200 0.33 1.57 1.32
DDH027 34.10 39.25 5.15 398 0.66 3.19 2.10
DDH030 29.80 37.60 7.80 464 0.78 2.17 1.69
DDH030 30.90 32.90 2.00 1277 2.14 4.31 3.03
RC172 162 167 5.00 398 0.49 0.21 1.31
RC203 24 27 3.00 420 0.47 3.98 3.57
RC203 41 44 3.00 352 0.37 1.83 1.97
RC204 27 33 6.00 449 0.29 0.86 1.06
RC209 9 18 9.00 495 0.49 0.94 0.87
RC212 98 102 4.00 189 0.17 0.35 3.16
RC214 39 54 15.00 256 0.21 0.30 1.78
RC215 57 66 9.00 110 0.11 0.80 1.21
RC219 87 95 8.00 665 0.70 0.43 2.01
RC235 93 98 5.00 163 0.02 0.08 0.14
RC235 109 114 5.00 182 0.19 1.09 1.46
RC239 21 25 4.00 205 0.07 2.21 1.35
RC243 25 30 5.00 182 0.25 1.35 1.45
RC247 32 37 5.00 347 0.29 1.73 1.81
RC250 170 180 10.00 327 0.52 0.03 2.53
RC254 75 88 13.00 731 0.84 2.46 2.10
RC256 89 92 3.00 492 0.49 3.59 3.14
RC256 98 110 12.00 233 0.30 0.48 1.76
RC257 29 31 2.00 363 0.35 1.75 0.50
RC261 37 41 4.00 273 0.46 1.40 1.31
RC262 56 64 8.00 174 0.24 1.40 1.32
Table 2: Selected drilling results from the Webb's Silver Project at 50 g/t Ag lower cut-off (with up
to 3m downholde internal dilution at <50 g/t; no top cut off). Intervals are in
downhole metres. True thickness varies from about 25-50% of the downhole
interval.
Further increases in overall tonnage and contained silver ounces are anticipated following additional deeper and
extensional drilling as the deposit remains open along strike to the south and down plunge. These targets are
considered high priority as some of the widest and highest grade intercepts are still open at relatively shallow
depth of approximately 80-140m below surface. The upcoming drilling programs, which are due to commence in the
September Quarter 2012, will initially involve a Reverse Circulation (RC) rig with follow up diamond drilling. A
third small footrprint RC rig will undertake shallow drilling and target potential near surface zones of
mineralisation.
2012 PLAN
The Company anticipates that evaluation of the Webbs project will remain the key focus for the 2013 Financial Year.
Additional deeper and extensional drilling is planned at Webbs and is expected to continue to grow the existing
resource, and move the project to feasibility.
SVL also plans to conduct a metallurgical scoping study and review each of the processing sequences with a view to
minimizing capital and operating costs while maximizing potential revenues. These results will help complement
subsequent open pit optimization studies and provide confidence in continuing to grow the existing resource, and
move the project towards feasibility.
OTHER PROJECTS
Webbs West (EL7602)
This project is located immediately west and north of the Webbs Silver Project and has potential for discover of
Webbs style deposits in metasediments adjacent to the Mole Granite.
Exploration has been limited to desktop studies and reviewing existing datasets such as stream sediment sampling and
aeromagnetics. Planned follow up work will include investigation of historical workings, ridge and spur mapping and
sampling in anomalous catchments identified in stream sediment sampling followed by field checking of geophysical
targets.
Mole River (ELs 6114 and 6771)
These leases are approximately 35km north east of the Webbs Silver Project and part of a contiguous block of
tenements fully owned by SVL.
The project area hosts more than 100 documented metalliferous occurrences along a broad north west trend
approximately 25km long and 3km wide. The geology of the area is dominated by Permian age sediments that are
intruded by the Early Triassic Mole Granite, similar to Webbs.
Geological mapping and sampling by SVL along with geophysics has identified numerous drill targets in this area.
Webbs Consols (EL 6239)
This project is located approximately 10km south of the Webbs Silver Project. A data review is underway with the aim
of commencing drilling in September 2012 on two groups of deposits - the westerly Webbs Consols group and the
eastern Tangoa-Wellingrove group. High grade silver mineralisation may occur along strike of known historical
workings. More recent work has identified the potential for large low grade deposits of Ag, Pb and Zn.
Leadville (EL 7928)
The Leadville project area is at the northern margin of the Lachlan Orogen about 15km east of Dunedoo in central
eastern NSW.
Numerous historical deposits are present in the area with recorded production in the late 19th century of 17,500
tonnes at recovered grades of around 600 g/t Ag and 10% Pb.
SVL intends to follow up on drilling completed in 1990s by previous explorers as well as explore geochemical and/or
geophysical targets.
Boro (EL 7640)
Located about 60km northeast of Canberra, the Boro area has had significant historical production of silver and
associated minerals.
Drilling is proposed on near surface zones of mineralisation that have been intersected in limited drilling by
previous explorers. Many of these zones are open along strike and at depth.
EL6269 (Walla Walla Joint Venture)
Silver Mines has elected to withdraw from this joint venture with Australia Oriental Minerals.
TENEMENT SUMMARY
To view the table accompanying this announcement, please visit the following link:
http://media3.marketwire.com/docs/SILVERB.jpg
Competent Persons' Statements
1 The information in this Document that relates to Exploration Results, Mineral Resources or Ore Reserves is based
on information compiled by Mr Robin Rankin, who is a Member of the Australasian Institute of Mining and Metallurgy
(MAusIMM) and registered as a Chartered Professional Geologist (CPGeo). Robin Rankin is Principal Consulting
Geologist and operator of the independent geological consultancy GeoRes. He has sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is
undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves' (the JORC Code). He consents to the inclusion in the
report of the matters based on his information in the form and context in which it appears.
2 The information in this Document that relates to Exploration Results, Mineral Resources or Ore Reserves is based
on information compiled by Mr David Hobby, consulting geologist to SVL, who is a Member of The Australasian
Institute of Mining and Metallurgy. Mr Hobby has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a
Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration' for
Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Hobby consents to the inclusion in the
report of the matters based on his information in the form and context in which it appears.
Results
The Company incurred a pre-tax operating profit of $737,251 (2011: loss $2,081,624) due mainly to write-off of Share
Option Reserve of $1,522,857.
Dividends
No dividend has been paid since the end of the previous financial year and no dividend is recommended for the
current year (2011: $Nil).
Significant changes in the state of affairs
There were no significant changes in the state of affairs in the Company during the year.
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.
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.
The Company had statutory obligations to protect the environment in which it was exploring and to rehabilitate areas
disturbed as a result of exploration activities.
The Company prepared and lodged an updated Review of Environmental Factors (REF) for the planned drilling program
scheduled to commence in the September Quarter 2012. This REF is a requirement under the license conditions and the
Company is awaiting approval.
During the reporting period the Company received a stop work order from the NSW Department of Trade and Investment
(Resources and Energy) for EL5674 until rehabilitation work was completed on drilling pads and other disturbed
areas. This rehabilitation work was completed and the stop work order was subsequently lifted.
Information on directors
David Henty Sutton, Non-Executive Chairman
David has many years' experience in stock broking and investment banking. He is currently the Principal of Dayton
Way Financial Group, which has offices in Sydney and Hong Kong.
The main business of Dayton Way is provision of corporate finance services, mainly to the resources sector.
Prior to his current position he has held director positions with other resource focused financial companies.
David has previously been a partner and Director of several stock exchange member firms including McNab Clarke. He
became a member of the Stock Exchange of Melbourne and subsequently the Australian Stock Exchange.
His past experience of public company directorships includes the Hudson Group of Companies and Reef Mining Limited.
He is currently Chairman of Sinovus Mining Limited, a director of Precious Metals Investments Limited and a director
of Empire Energy Group Ltd, a producer of oil and natural gas in USA.
Other listed company directorships held during past 3 years:
------------------------------------------------------------
Earth Heat Ltd
Sinovus Mining Ltd
Empire Energy Group Ltd
Precious Metals Investments Limited
Charles David Straw, Managing Director
Charles is an economic geologist with over 15 years in the mining industry. His experience is multi-faceted ranging
from environmental management and planning through to mineral exploration, project development, valuation, finance
and corporate management. He holds an honours degree in applied geology from UNSW in Sydney and is a member of the
CIM and AUSIMM. He has lead the exploration and evaluation of precious and base metals projects in Australia, South
America and China. He is currently a Director and CEO of TSX.V listed Artha Resources Corporation.
Other listed company directorships held during past 3 years:
------------------------------------------------------------
Precious Metals Investments Limited
Malcolm Harvey Bird, Non Executive Director
Malcolm has over 35 years experience in the stock broking industry with an emphasis on mining investments. He was a
founder and director of Morning Star Gold NL and Central West Gold NL for 23 years and has an extensive knowledge of
mineral exploration in NSW.
Other listed company directorships held during past 3 years:
------------------------------------------------------------
Central West Gold NL
Company Secretary
Kevin Martin Lynn B.Bus, CA, FAIDC, FFin
Mr Lynn is a Chartered Accountant with over 20 years corporate and finance and is also Company Secretary and or
Director of 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 Managing Directors
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 $48,000 per annum
Non-executive Directors $30,000 per annum
Audit Committee members $Nil per annum
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 2012:
------------------------------------------------------------------------------------------------------------------
Non-cash
Salary & Non- Super- Retirement share-based Other
Fees monetary annuation benefits payments bonuses Total
------------------------------------------------------------------------------------------------------------------
D Sutton 2012 48,000 - - - - - 48,000
2011 48,000 - - - 402,556 - 450,556
------------------------------------------------------------------------------------------------------------------
M Bird 2012 30,000 - - - - - 30,000
2011 30,000 - - - 402,556 - 432,556
------------------------------------------------------------------------------------------------------------------
C Straw 2012 150,020 - - - - - 150,020
2011 224,750 - - - 402,556 - 627,306
------------------------------------------------------------------------------------------------------------------
Remuneration of the 5 named executives who receive the highest remuneration for the year ended 30 June 2012:
------------------------------------------------------------------------------------------------------------------
Non-cash
share-based
Salary & Non- Super- Retirement payments Other
Fees monetary annuation benefits bonuses Total
------------------------------------------------------------------------------------------------------------------
K Lynn 2012 48,000 - - - - - 48,000
2011 44,000 - - - 88,778 - 132,778
------------------------------------------------------------------------------------------------------------------
Options and rights granted as part of remuneration
No options or performance rights were granted to Directors during the year.
For details of Directors' and executives' interests in options and rights at year end, refer note 17 of the
financial statements.
Performance Income as a proportion of total remuneration
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 2012
and the number of meetings attended by each Director.
------------------------------------------------------------------------------------------------
Name Board meetings
Eligible Attended
David Henty Sutton 6 6
Malcolm Harvey Bird 6 6
Charles David Straw 6 6
------------------------------------------------------------------------------------------------
In light of the current activities and size of the Company, it is not presently considered necessary for separate
Audit, Nomination 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 issued:
- 200,000 shares at 17 cents upon the conversion of unlisted options on 19 July 2011;
- 300,000 shares at 17 cents upon the conversion of unlisted options on 15 August 2011;
- 500,000 shares at 17 cents upon the conversion of unlisted options on 27 August 2011
- 6,728,525 listed options at 1 cent with an exercise price of 35 cents to professional and sophisticated
investors on 30 September 2011 and expiring 31 October 2012;
- 550 shares at 35 cents upon the conversion of listed options on 17 October 2011;
- 300 shares at 35 cents upon the conversion of listed options on 19 October 2011;
- 6,882,207 listed options at 1 cent with an exercise price of 35 cents to professional and sophisticated
investors on 24 October 2011 and expiring 31 October 2012;
- 12,504,733 shares at 6 cents per share to professional and sophisticated investors on 8 June 2012 together
with 6,252,367 attaching free options at an exercise price of 10 cents expiring 13 November 2013.
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.
Directors and officers indemnification
During the financial year Silver Mines Limited paid premiums to insure and indemnify the Directors and Officers of
the Group.
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 14 and forms part of the Director's Report.
This report is made in accordance with a resolution of the Directors.
David Sutton
Director
29 August 2012
AUDITOR'S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF SILVER MINES LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Silver Mines Limited.
As lead audit principal for the audit of the financial statements of Silver Mines Limited for the financial period
ended 30 June 2012, I declare that to the best of my knowledge and belief, that there have been no contraventions
of:
(i) the auditor's independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Moyes Yong & Co Partnership William M Moyes - Partner
Chartered Accountants 29 August 2012
Level 7, Norwich House
6 O'Connell Street
Sydney NSW 2000
SILVER MINES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
------------------------------------
Notes 2012 2011
$ $
------------------------------------
Revenues from ordinary activities 2 77,386 79,737
Expenses from ordinary activities
Accounting/ company secretarial (53,719) (70,792)
Wages - (22,020)
Share registry (56,600) (49,472)
Securities exchange fees (50,728) (45,494)
Bank fees (5,370) (6,193)
Auditors (18,700) (16,650)
Directors emoluments (78,000) (97,811)
Office expenses (13,299) (44,885)
IT & communications (35,903) (51,555)
Rent - (7,020)
Management fees (240,000) (140,000)
Depreciation (28,381) (31,924)
Insurance (31,329) (13,296)
Marketing (105,316) (86,801)
Professional advisors (5,090) (14,771)
Plus market listing fees (49,869) (42,369)
Other expenses from ordinary activities (90,688) (123,861)
Write-off Share Option Reserve 1,522,857 (1,296,447)
----------------------------
Total expenses 3 659,865 (2,161,361)
----------------------------
Profit/(loss) before income tax expense 737,251 (2,081,624)
Income tax expense 4 - -
----------------------------
Profit/(loss) for the year 737,251 (2,081,624)
Other comprehensive income - -
----------------------------
Total comprehensive profit/(loss) for the year net
of tax 737,251 (2,081,624)
----------------------------
----------------------------
----------------------------
Cents Cents
----------------------------
Basic earnings per share 23 0.01 (0.02)
Diluted earnings per share 23 0.01 (0.01)
The statement of comprehensive income is to be read in conjunction with the notes to the financial statements.
SILVER MINES LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012
--------------------------------------------
Notes 2012 2011
$ $
--------------------------------------------
Current assets
Cash and cash equivalents 5 800,383 3,371,757
Receivables 6 596,674 1,201,356
--------------------------------------------
Total current assets 1,397,057 4,573,113
--------------------------------------------
Non-current assets
Other financial assets 7 110,000 120,550
Intangible assets:
Deferred exploration & development 8 11,190,929 7,675,327
Property plant & equipment 9 61,935 47,880
Investments 10 100,000 100,000
--------------------------------------------
Total non-current assets 11,462,864 7,943,757
--------------------------------------------
Total assets 12,859,921 12,516,870
--------------------------------------------
Current liabilities
Payables 11 334,925 161,380
Provisions 12 - 32,598
--------------------------------------------
Total current liabilities 334,925 193,978
--------------------------------------------
Non-current liabilities
Payables 11 19,321 38,643
--------------------------------------------
Total non-current liabilities 19,321 38,643
--------------------------------------------
Total liabilities 354,246 232,621
--------------------------------------------
Net assets 12,505,675 12,284,249
--------------------------------------------
Equity
Contributed equity 13 15,868,861 14,861,829
Reserves 14 - 1,522,857
Accumulated losses 15 (3,363,186) (4,100,437)
--------------------------------------------
Total equity 12,505,675 12,284,249
--------------------------------------------
--------------------------------------------
The statement of financial position is to be read in conjunction with the notes to the financial statements.
SILVER MINES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
-----------------------------------------------------------------------------------------------------------------------
Notes Share-based
payment Share option
Ordinary reserve reserve Accumulated
shares $ $ losses Total
$ $ $
-----------------------------------------------------------------------------------------------------------------------
Balance at 30 June 2007 5,612,981 - - (307,742) 5,305,239
Share-based payments 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
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Share-based payments during the 185,675
year 185,675 - - -
Costs of funds raised (9,283) - - - (9,283)
Loss attributable to members of
the Company - - - (673,091) (673,091)
-------------------------------------------------------------------------
Balance at 30 June 2009 5,747,792 - - (1,527,313) 4,220,479
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Share-based payments during the 1,499,325 - - - 1,499,325
year
Costs of funds raised (72,591) - - - (72,591)
Loss attributable to members of
the Company - - - (491,500) (491,500)
-------------------------------------------------------------------------
Balance at 30 June 2010 7,174,526 - - (2,018,813) 5,155,713
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Share-based payments during the
year 4,200,000 - 1,522,857 - 5,722,857
Conversion of options 3,826,391 - - - 3,826,391
Costs of funds raised (339,088) - - - (339,088)
Loss attributable to members of
the Company - - - (2,081,624) (2,081,624)
-------------------------------------------------------------------------
Balance at 30 June 2011 14,861,829 - 1,522,857 (4,100,437) 12,284,249
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Share-based payments during the
year 750,284 - (1,522,857) - (772,573)
Conversion of options 306,405 - - - 306,405
Costs of funds raised (49,657) - - - (49,657)
Profit attributable to members of
the Company - - - 737,251 737,251
-------------------------------------------------------------------------
Balance at 30 June 2012 15,868,861 - - (3,363,186) 12,505,675
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The statement of changes in equity is to be read in conjunction with the notes to the financial
statements.
SILVER MINES LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2012
------------------------------------------
Notes 2012 2011
$ $
------------------------------------------
Cash flows from operating activities
Interest received 77,386 79,737
Interest paid (4,823) (4,824)
Payments to suppliers and employees (652,443) (1,051,428)
-------------------------------
Net cash outflows from operating activities 20 (579,880) (976,515)
-------------------------------
Cash flows from investing activities
Proceeds from/(payments for) exploration bonds 10,550 (60,000)
Payments for property plant & equipment (42,436) (14,948)
Payments for exploration expenditure (2,947,319) (3,593,387)
Payments for investments - (100,000)
-------------------------------
Net cash outflows from investing activities (2,979,205) (3,768,335)
-------------------------------
Cash flows from financing activities
Proceeds from the issue of shares 1,056,689 8,086,714
Payments for fund raising costs (49,657) (339,088)
Payments for borrowings - finance leases (19,321) (19,321)
-------------------------------
Net cash inflows from financing activities 987,711 7,728,305
-------------------------------
Net (decrease)/increase in cash held (2,571,374) 2,983,455
Cash at the beginning of the financial year 3,371,757 388,302
-------------------------------
Cash at the end of the financial year 5 800,383 3,371,757
-------------------------------
-------------------------------
The statement of cash flows is to be read in conjunction with the notes to the financial statements.
SILVER MINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a) Reporting entity
Silver Mines Limited (the "Company") is a public company domiciled in Australia. The financial report covers
Silver Mines Limited as an individual entity. The financial report was authorised for issue on 29 August
2012 by the Board of Directors.
The Company primarily is involved in the exploration for minerals in Australia.
(b) Basis of preparation
The financial report is a general purpose financial report which has been prepared in accordance with
Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements
of the Australian Accounting Standards Board and the Corporations Act 2001. Compliance with Australian
Accounting Standards ensures the financial statements and notes also comply with International Financial
Reporting Standards.
The financial report is presented in Australian dollars which is also the functional currency. The financial
report is prepared on an accruals basis and is based on historical costs modified where applicable, by the
measurement of fair value of selected non-current assets, financial assets and financial liabilities.
The preparation of a financial report requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgments about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period or in
the period of the revision and future periods if the revision affects both current and future periods.
Material accounting policies set out below have been applied consistently to all periods presented in the
financial report.
Reporting basis and conventions
The financial report is presented in Australian dollars.
The preparation of a financial report in conformity with Australian Accounting Standards requires management
to make judgments, estimates and assumptions that effect the application of policies and the reported amounts
of assets, liabilities, revenue and expenses.
- Critical accounting estimates and judgments
- The estimates and judgments incorporated into the financial report are based on historical experiences and
the best available current information on current trends and economic data, obtained both externally and
within the Company. The estimates and judgments made assume a reasonable expectation of future events but
actual results may differ from these estimates.
- Key estimates - Impairment
The Company assesses impairment at each reporting date by evaluating conditions specific to the Company
that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of
the asset is determined. Value-in-use calculations performed in assessing recoverable amounts
incorporate a number of key estimates.
Rehabilitation
The Company is required to estimate the rehabilitation costs of its operations in the accounting policy note
in paragraph (c). The estimate is based on management best estimate of the cost.
Exploration and evaluation costs
The Company applies judgment in determining which exploration costs should be capitalized or expensed as per
the accounting policy in paragraph (c).
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision effects only that period, or in
the period of the revision and future periods if the revision affects both current and future periods. There
were no key adjustments during the year which required accounting estimates and judgments.
The financial report has been prepared on an accruals basis and is based on historical costs modified by the
revaluation of selected non-current assets, financial assets and financial liabilities for which the fair
value basis of accounting has been applied.
The following is a summary of the material accounting policies adopted by the economic entity in the
preparation of the financial report. The accounting policies have been consistently applied, unless
otherwise stated.
(c) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of
interest. These costs are only carried forward to the extent that they are expected to be recouped through
the successful development of an area or where activities in the area have not yet reached a stage, which
permits reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profits in the year which
the decision to abandon the area is made.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to
carry forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from where exploration commences and are
included in the costs of that stage. Site restoration costs include the dismantling and removal of mining
plant, equipment and building structure, waste removal, and rehabilitation of the site in accordance with
clauses of the mining permits. Such costs have been determined using estimates of future costs, current
legal requirements and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of
site restoration, there is uncertainty regarding the nature and extent of the restoration due to community
expectations and future legislation. Accordingly, the costs have been determined on the basis that the
restoration will be completed within one year of abandoning the site.
Exploration and evaluation assets are tested for impairment each year. When the facts and circumstances
suggest that the carrying amount exceeds the recoverable amount, the carrying amount is written down to its
likely recoverable amount.
(d) Trade creditors
A liability is recorded for goods and services prior to balance date, whether invoiced to the Company or not.
Trade creditors are normally settled within 30 days.
(e) Cash
For the purposes of the statement of cash flows, cash and cash equivalents included cash on hand and at call
deposits with banks or financial institutions, investments in money market instruments maturing within less
than two months and net of bank overdrafts.
(f) Net fair value
The net fair value of cash, investments and trade creditors approximates their carrying value.
(g) Revenue
Interest revenue is recognised on a proportional basis taking in to account the interest rates applicable to
the financial assets.
Other revenue is recognised when the right to receive the revenue has been established.
(h) Income tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-
assessable or disallowed items. It is calculated using the tax rates that have been enacted or are
substantially enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. No deferred income tax will be recognised from the initial recognition of an asset or
liability, excluding a business combination, where there is no effect on accounting or taxable profit or
loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is
realised or liability is settled. Deferred tax is credited in the income statement except where it relates
to items that may be credited directly to equity, in which case the deferred tax is adjusted directly
against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax
profits will be available against which deductible temporary differences can be utilised. The amount of
benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the economic entity will
derive sufficient future assessable income to enable the benefit to be realised and comply with the
conditions of deductibility imposed by the law.
(i) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables
and payables in the balance sheet are shown inclusive of GST.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from or payable to the Australian
Taxation Office, are classified as operating cash flows.
(j) Acquisitions of assets
The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other
assets are acquired. Cost is determined as the fair value of the assets given up at the date of acquisition
plus costs incidental to the acquisition.
(k) Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.
Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of
replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as a replacement only if it is eligible for
capitalisation.
(i) The depreciation rates used are as follows:
Plant and equipment 33 1/3% straight line
Office furniture and equipment 33 1/3% straight line
Motor vehicles 20% straight line
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
(ii) Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date with
recoverable amount being estimated when events or changes in circumstances indicate that the carrying value
may be impaired.
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
For an asset that does not generate largely independent cash flows, recoverable amount is determined for the
cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to be
close to its fair value.
Impairment exists when the carrying amount of an asset or cash-generating units exceeds its estimated
recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.
For plant and equipment, impairment losses are recognised in the income statement.
(l) Employee entitlements
Wages, salaries and annual leave
Provision is made for the Company's liability for employee benefits arising from services rendered by
employees to balance date. Employee benefits that are expected to be settled within 12 months have been
measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee
benefits payable later than12 months have been measured at the present value of the estimated future cash
outflows to be made for those benefits.
Long service leave
A provision for long service leave is taken up where applicable for all employees.
Equity-settled compensation
The Company operates a share-based compensation plan. These include both a share option arrangement and an
employee share scheme. The bonus element over the exercise price of the employee services rendered in
exchange for the grant of shares and options is recognised as an expense in the income statement. The total
amount to be expensed over the vesting period is determined by reference to the fair value of the shares of
the options granted.
Employee option plan
The establishment of the Silver Mines Limited Employee Share Option Plan (ESOP) was approved by shareholders
at the annual general meeting held on 29 November 2007. The ESOP was designed to provide long term
incentives for Directors to deliver long term shareholder returns.
The fair value of options granted under the ESOP is recognised as an employee benefit expense with
corresponding increase in equity. The fair value is measured at grant date. The fair value at grant date is
measured using a Black-Scholes option pricing model that takes into consideration the exercise price, the
term of the option, the impact of dilution and the share price at grant date.
Upon the exercise of options, the exercise proceeds received are allocated to share capital and the balance
of the share-based payments reserve relating to those options is transferred to share capital.
(m) Impairment
At each reporting date, the Company reviews the carrying values of its tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell
and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over
its recoverable amount is expensed to the income statement. Impairment testing is performed annually for
intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
(n) Intangible assets
Intangible assets acquired in a business are initially measured at cost. Intangible assets with indefinite
lives are tested for impairment annually either individually or at the cash-generating unit level. Such
intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed
each reporting period to determine whether indefinite life assessment continues to be supportable. If not,
the change in the useful life assessment from indefinite to finite is accounted for as a change in an
accounting estimate and is thus accounted for on a prospective basis.
(o) Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options, or for the acquisition of a business, are included in the
cost of the acquisition as part of the purchase consideration.
If the Company reacquires its own equity instruments (e.g. as the result of a share buy-back), those
instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised
in the profit or loss and the consideration paid including any directly attributable incremental costs (net
of income taxes) is recognised directly in equity.
(p) Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of
the Company by the weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
(q) Financial instruments
Recognition and initial measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the
entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for
financial assets that are delivered within timeframes established by marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is
not classified as at fair value through profit or loss. Transaction costs related to instruments classified
as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are
classified and measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset
is transferred to another party whereby the entity no longer has any significant continuing involvement in
the risks and benefits associated with the asset. Financial liabilities are derecognised where the related
obligations are either discharged, cancelled or expire. The difference between the carrying value of the
financial liability extinguished or transferred to another party and the fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is recognised in profit and loss.
Classification and subsequent measurement
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost using the effective interest rate
method.
Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised
cost using the effective interest rate method.
(r) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognised as an integral part of the total lease expense over
the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease
term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term
of the lease when the lease adjustment is confirmed.
(s) Comparative figures
Where required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(t) New accounting standards for application in future periods
The AASB has issued new and amended accounting standards and interpretations that have mandatory
application dates for future reporting periods. The Company has decided against early adoption of these
standards. A discussion of those future requirements and their impact on the Company follows:
-------------------------------------------------------------------------------------------------------------------
Effective for annual
reporting periods Expected to be initially
beginning on applied in the financial
Standard/Interpretation or after year ending
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 9 'Financial Instruments, AASB 200911 1 January 2013 30 June 2014
Amendments to Australian Accounting
Standards arising from AASB 9 and
AASB 2010-7 Amendments to Australian
Accounting Standards arising from AASB 9
(December 2010)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 10 Consolidated Financial Statements 1 January 2013 30 June 2014
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 11 Joint Arrangements 1 January 2013 30 June 2014
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 12 Disclosure of Interests in Other 1 January 2013 30 June 2014
Entities
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 127 Separate Financial Statements 1 January 2013 30 June 2014
(2011)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 128 Investments in Associates and Joint 1 January 2013 30 June 2014
Ventures (2011)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 13 Fair Value Measurement and AASB 1 January 2013 30 June 2014
2011-8 Amendments to Australian Accounting
Standards arising from AASB 13
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 119 Employee Benefits (2011) and 1 January 2013 30 June 2014
AASB 2011-10 Amendments to Australian
Accounting Standards arising from AASB 119
(2011)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 2010-8 Amendments to Australian 1 January 2013 30 June 2014
Accounting Standards - Deferred Tax: Recovery
of Underlying Assets
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 2011-4 Amendments to Australian 1 January 2013 30 June 2014
Accounting Standards to Remove Individual Key
Management Personnel Disclosure
Requirements
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 2011-7 Amendments to Australian 1 January 2013 30 June 2014
Accounting Standards arising from the
Consolidation and Joint Arrangements
standards
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
AASB 2011-9 Amendments to Australian 1 July 2012 30 June 2013
Accounting Standards - Presentation of Items of
Other Comprehensive Income
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Interpretation 20 Stripping Costs in the 1 January 2013 30 June 2014
Production Phase of a Surface Mine and AASB
2011-12 Amendments to Australian Accounting
Standards arising from Interpretation 20
-------------------------------------------------------------------------------------------------------------------
The Company does not anticipate the early adoption of any of the above Australian Accounting Standards.
SILVER MINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
-----------------------------
2012 2011
$ $
-----------------------------
2. REVENUE
Revenue from operating activities
Interest received 77,386 79,737
-----------------------------
3. OPERATING EXPENSES
Expenses from operating activities:
Accounting/company secretarial (53,719) (70,792)
Wages - (22,020)
Share registry (56,600) (49,472)
Securities exchange fees (50,728) (45,494)
Bank fees (5,370) (6,193)
Auditors (18,700) (16,650)
Directors emoluments (78,000) (97,811)
Office expenses (13,299) (44,885)
IT & communications (35,903) (51,555)
Rent - (7,020)
Management fees (240,000) (140,000)
Depreciation (28,381) (31,924)
Insurance (31,329) (13,296)
Marketing (105,316) (86,801)
Professional advisors (5,090) (14,771)
Plus market listing fees (49,869) (42,369)
Other expenses from ordinary activities (90,688) (123,861)
Write-off Share Option Reserve 1,522,857 (1,296,447)
-----------------------------
Total 659,865 (2,161,361)
-----------------------------
-----------------------------
4. INCOME TAX
(a) Temporary differences
Current tax - -
Deferred tax - -
-----------------------------
Total - -
-----------------------------
-----------------------------
(b) Reconciliation of income tax expense to prima facie tax payable
Operating profit/(loss) before income tax 737,251 (2,081,624)
-----------------------------
-----------------------------
Prima facie income tax (expense)/benefit at 30% on operating
profit/(loss) (221,175) 624,487
Add tax effect of:
Tax losses and temporary differences not recognised 221,175 (624,487)
Non temporary differences - -
-----------------------------
Income tax attributable to operating profit/(loss) - -
-----------------------------
-----------------------------
Directors are of the view that there is insufficient probability that the Company will derive
sufficient income in the foreseeable future to justify booking the tax losses and temporary
differences as deferred tax assets and deferred tax liabilities.
(c) There is no amount of tax benefit recognised in equity as the tax
effect of temporary differences has not been booked
(d) Tax losses
Unused tax losses for which no tax loss has been booked as a 3,363,186 4,100,437
deferred tax asset adjusted for non temporary differences
Potential tax benefit at 30% 1,008,956 1,230,131
-----------------------------
-----------------------------
(e) Unrecognised temporary differences
Non deductible amounts as temporary differences - -
Accelerated deductions for book compared to tax - -
-----------------------------
Total 1,008,956 1,230,131
-----------------------------
-----------------------------
Potential effect on future tax expense 1,008,956 1,230,131
-----------------------------
-----------------------------
5. CASH AND CASH EQUIVALENTS
Cash at bank and on hand 800,383 3,371,757
-----------------------------
-----------------------------
Cash at the end of the financial year as shown in the statement of cash flows is reconciled in the
related items in the statement of financial position as follows:
Cash assets 800,383 3,371,757
-----------------------------
-----------------------------
The effective interest rates on term deposits were 3.8% (2011:
4.8%).
6. RECEIVABLES
Other debtors 170,838 207,237
Provision for doubtful debts - -
Prepayments 425,836 994,119
-----------------------------
596,674 1,201,356
-----------------------------
-----------------------------
7. OTHER FINANCIAL ASSETS
Non-current
Performance guarantee bonds 110,000 120,550
-----------------------------
-----------------------------
8. INTANGIBLE ASSETS
Non-current
Exploration expenditure
Costs carried forward in respect of areas of interest in:
Exploration and evaluation phase
Opening balance 7,675,327 5,076,059
Expenditure in the period 3,515,602 2,599,268
Expenditure written off - -
-----------------------------
11,190,929 7,675,327
-----------------------------
-----------------------------
9. PROPERTY, PLANT AND EQUIPMENT
Plant and equipment - at cost 102,970 88,022
Financial lease assets 96,607 96,607
Assets acquired 42,436 14,948
Assets sold - -
Less: Accumulated depreciation (180,078) (151,697)
-----------------------------
61,935 47,880
-----------------------------
-----------------------------
Reconciliation
Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and
end of the current financial year are as follows:
-----------------------------------------------
Plant & Motor Vehicles
Equipment Total
$ $ $
-----------------------------------------------
Carrying value at start of year 12,458 35,422 47,880
Additions 4,860 37,576 42,436
Disposals - - -
Depreciation (5,913) (22,468) (28,381)
-----------------------------------------------
Carrying value at end of year 11,405 50,530 61,935
-----------------------------------------------
-----------------------------------------------
-----------------------------
2012 2011
$ $
-----------------------------
10. INVESTMENTS
Investment in Precious Metals Investments Ltd 100,000 100,000
-----------------------------
-----------------------------
11. PAYABLES
Current
Trade creditors and accruals 315,665 142,120
Hire purchase creditors 19,260 19,260
-----------------------------
334,925 161,380
-----------------------------
-----------------------------
Non Current
Hire purchase creditors 19,321 38,643
-----------------------------
-----------------------------
12. PROVISIONS
Employee entitlements - 32,598
-----------------------------
-----------------------------
Number of employees at year end 1 1
-----------------------------
-----------------------------
13. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Balance at the beginning of the financial year 14,861,829 7,174,526
Issue of shares to raise capital 750,284 4,200,000
Conversion of options 306,405 3,826,391
Share issue costs (49,657) (339,088)
-----------------------------
Balance at the end of the financial year 15,868,861 14,861,829
-----------------------------
-----------------------------
Consisting of 148,611,201 ordinary shares (2011: 135,105,664 ordinary shares)
(b) Movements in ordinary share capital
------------------------------------------------------------------------------------------------------------------
Number of Issue
Date Details shares price $
------------------------------------------------------------------------------------------------------------------
30 June 2009 Balance 48,802,505 5,747,792
28 August 2009 Placement 695,000 $0.035 24,325
16 September 2009 Placement 3,200,000 $0.035 112,000
2 October 2009 Placement 7,900,000 $0.040 316,000
9 December 2009 Placement 1,957,687 $0.046 90,000
11 December 2009 Placement 6,250,000 $0.080 500,000
7 June 2010 Placement 5,376,470 $0.085 457,000
Transaction Costs (72,591)
------------ ------------
30 June 2010 Balance 74,181,662 7,174,526
6 July 2010 Placement 20,000,000 $0.09 1,800,000
7 December 2010 Placement 10,000,000 $0.24 2,400,000
Various up to 1 May 2011 Options exercised 29,624,002 $0.12 3,554,880
5 April 2011 Options exercised 1,000,000 $0.07 70,000
5 April 2011 Options exercised 300,000 $0.17 51,000
Option placement $0.01 150,511
Transaction costs (339,088)
------------ ------------
30 June 2011 Balance 135,105,664 14,861,829
Adjustment (46) -
19 July 2011 Options exercised 200,000 $0.17 34,000
15 August 2011 Options exercised 300,000 $0.17 51,000
27 August 2011 Options exercised 500,000 $0.17 85,000
30 September 2011 Listed option placement $0.01 67,285
17 October 2011 Listed options exercised 550 $0.35 193
19 October 2011 Listed options exercised 300 $0.35 105
24 October 2011 Listed option placement $0.01 68,822
8 June 2012 Placement 12,504,733 $0.06 750,284
Transaction costs (49,657)
------------ ------------
148,611,201 15,868,861
------------ ------------
------------ ------------
(c) Issued and paid up capital
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company
in proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of fully
paid ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each
share is entitled to one vote.
(d) Share options
At 30 June 2012 details of Listed and Unlisted Options are as follows:
-------------------------------------------------------------------------------------------------------
Details Number Exercise price Expiry date
-------------------------------------------------------------------------------------------------------
Unlisted options 3,500,000 20 cents 6 July 2012
Unlisted options 2,000,000 24 cents 27 August 2012
Unlisted options 2,000,000 40 cents 27 August 2013
Unlisted options 8,500,000 50 cents 23 December 2015
Listed options 13,609,882 35 cents 31 October 2012
Unlisted options 6,252,367 10 cents 13 November 2013
Performance rights 3,000,000
------------
Total 38,862,249
------------
------------
(e) Capital management
The Company's objectives when managing capital is to safeguard the ability to continue as a going concern, so
that it can continue to provide returns to shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.
Management effectively manages the Company's capital by assessing the Company's financial risks and adjusting
its capital structure in response to changes in these risks and in the market. There have been no changes in
the strategy adopted by management to control the capital of the Company since the prior year.
-----------------------------
2012 2011
Number Number
Movements in options -----------------------------
Balance at the beginning of the financial year 25,000,000 8,017,503
Performance rights issued - 3,000,000
Options lapsed (5,000,000) (950,483)
Options exercised (1,000,850) (29,618,152)
Options issued 19,863,099 44,551,132
-----------------------------
Balance at the end of the financial year 38,862,249 25,000,000
-----------------------------
-----------------------------
-----------------------------
2012 2011
$ $
-----------------------------
14. RESERVES
Share option reserve - 847,857
Performance rights reserve - 675,000
-----------------------------
- 1,522,857
-----------------------------
-----------------------------
15. ACCUMULATED LOSSES
Opening balance 4,100,437 2,018,813
Net (profit)/loss for year (737,251) 2,081,624
-----------------------------
Closing balance 3,363,186 4,100,437
-----------------------------
-----------------------------
16. AUDITOR'S REMUNERATION
Remuneration for audit or review of the financial reports of the
Company:
Current auditors of the Company:
Audit and review of the financial statements
- Moyes Yong & Co 18,700 16,650
- Other services - -
-----------------------------
18,700 16,650
-----------------------------
-----------------------------
17. REMUNERATION OF DIRECTORS AND EXECUTIVES
(a) Names of Directors and specified executives and positions held at any time during the year:
-------------------------------------------------------------------
Directors
D Sutton Chairman - Non-Executive
M Bird Director - Non-Executive
C Straw Managing Director
Specified executives
K Lynn Company Secretary
-------------------------------------------------------------------
(b) Relevant interests in ordinary shares and options at the date of this report:
SHARES
-------------------------------------------------------------------------------------------------------------------
Net change of
Balance Net change associated Balance
Ordinary shares 1 July 2011 other entities 30 June 2012
-------------------------------------------------------------------------------------------------------------------
Directors
D Sutton 2,268,114 - - 2,268,114
M Bird 631,850 - - 631,850
C Straw 728,532 - - 728,532
-------------------------------------------------------------------------------------------------------------------
OPTIONS and PERFORMANCE RIGHTS
-------------------------------------------------------------------------------------------------------------------
Employee Options and
options and performance
performance Balance Granted as rights lapsed Net change Balance
rights 1 July 2011 remuneration other 30 June 2012
-------------------------------------------------------------------------------------------------------------------
Directors
D Sutton 3,500,000 - - - 3,500,000
M Bird 3,500,000 - - - 3,500,000
C Straw 3,500,000 - - - 3,500,000
Specified executives
K Lynn 1,500,000 - - - 1,500,000
-------------------------------------------------------------------------------------------------------------------
(c) Directors' and senior officers' emoluments
The Remuneration Committee is responsible for making recommendations to the Board on remuneration policies
applicable to Board members and senior Officers of the Company. The Board's remuneration policy is to
ensure the remuneration level properly reflects the person's duties and responsibilities and that
remuneration is competitive in attracting, retaining and motivating people of the highest quality.
Details of the nature and amount of the remuneration of each Director of the Company are set out below:
Director remuneration for the year ended 30 June 2012:
-------------------------------------------------------------------------------------------------------------------
Non-cash
Salary & Non- Super- Retirement share-based Other
Fees monetary annuation benefits payments bonuses Total
-------------------------------------------------------------------------------------------------------------------
D Sutton 2012 48,000 - - - - - 48,000
2011 48,000 - - - 402,556 - 450,556
-------------------------------------------------------------------------------------------------------------------
M Bird 2012 30,000 - - - - - 30,000
2011 30,000 - - - 402,556 - 432,556
-------------------------------------------------------------------------------------------------------------------
C Straw 2012 150,020 - - - - - 150,020
2011 224,750 - - - 402,556 - 627,306
-------------------------------------------------------------------------------------------------------------------
Remuneration of the 5 named executives who receive the highest remuneration for the year ended 30 June 2012:
-------------------------------------------------------------------------------------------------------------------
Non-cash
Salary & Non- Super- Retirement share-based Other
Fees monetary annuation benefits payments bonuses Total
-------------------------------------------------------------------------------------------------------------------
K Lynn 2012 48,000 - - - - - 48,000
2011 44,000 - - - 88,778 - 132,778
-------------------------------------------------------------------------------------------------------------------
(d) Individual directors' and executives compensation disclosures
The Company has not employed any executive officers, other than Directors, who were involved in, concerned
in, or who took part in the management of the Company's affairs. Details of the nature and amount of the
remuneration of each Director and executive of the Company and some equity instrument disclosures as
permitted by Corporations Regulations are provided in the Remuneration Report section of the Directors'
Report.
The fair value of options at grant date is determined using the Black-Scholes formula. The model inputs were
a share price of $0.26, an exercise price of $0.50, expected volatility of 52%, a term of 5 years and a risk-
free interest rate of 6%.
Performance rights granted as part of remuneration have been valued using probability criteria attaching to
each of the performance conditions applying under the Company's Performance Rights Plan approved by
shareholders at the Company's Annual General Meeting on 30 November 2010.
Performance criteria:
(i) That the share price of the Company has increased by more than 50% for a period of 5 days since inception
of the plan (probability 100%);
(ii) That a JORC resource of 15 million ounces of silver is achieved by the Company by 31 December 2011
(probability 50%);
(iii) That Directors remain as directors until 30 September 2012 (probability 100%); and
(iv) Overall probability calculated at 75% of the above three criteria occurring.
18. RELATED PARTY TRANSACTIONS
Related parties of the Company fall into the following categories:
18.1 Trading transactions
During the year, the Company entered into the following trading transactions with related parties:
(i) Centric Minerals Management Pty Ltd (CMM) was paid $653,667 (2011: $209,089) to provide management,
administrative services (including provision of office space and facilities) and geological consulting
services to the Company from 1 December 2010. A break-down of these amounts paid is as follows:
-------------------------------
2012 2011
$ $
-------------------------------
Office fit-out costs 16,773 -
Geological consulting services 305,002 25,850
Office rent, accounting, investor relations, IT services 242,000 176,000
etc
General expense reimbursements 9,450 991
Website design and update 3,269 -
Company secretarial expenses 14,685 -
HS&E system design and implementation 24.838 -
Marketing expenses 37,650 6,248
-------------------------------
653,677 209,089
-------------------------------
-------------------------------
As at balance date the company owed $3,740 (2011: $24,253) to CMM. Messrs Sutton and Straw are
directors of CMM. Neither Messrs Sutton or Straw received any direct financial benefit from CMM.
CMM provides these services to other companies within the mineral exploration sector globally.
(ii) Dayton Way Financial Pty Ltd, an entity controlled by Mr Sutton, received $52,807 (2011: $125,394) from the
Company in relation to fees associated with raising equity for the Company.
(iii) Davcha Resources Pty Ltd, an entity controlled by Mr Straw, received $Nil (2011: $39,405) from the Company
in relation to geological consulting services for the Company.
(iv) Strategy-Matters International Pty Ltd, an entity controlled by Mr Lynn, received $57,200 (2011: $123,475)
from the Company in relation to accounting and secretarial services for the Company.
(v) During the financial year the Company paid $255,153 (2011: $1,191,594) for drilling services to New
Competitive Drilling Pty Ltd (NCD), an entity involved in drilling services to the exploration sector.
At the beginning of the financial year, the Company had prepaid drilling expenses to NCD of
$956,550 representing 13,665 metres at $70 per metre. During the financial year the Company
utilised 7,839 meters at $70 per metre of this prepayment. Therefore as at 30 June 2012 the
Company has 5,826 metres at $70 per metre representing $407,820 available for future drilling. Mr
Straw is a director and Mr Lynn is company secretary of NCD.
18.2 Other related party transactions
18.2.1 Equity interests in related parties
(i) The Company holds 250,000 fully paid ordinary shares at 40 cents each in Precious Metals Investments Ltd
(PMZ), an entity involved in exploration for precious metals. Messrs Sutton, Straw and Lynn are directors
of PMZ.
19. SEGMENT INFORMATION
Business segments
The Company operates in the mining industry in Australia only. Operations comprise mineral exploration.
---------------------------------
2012 2011
$ $
---------------------------------
20. RECONCILIATION OF OPERATING PROFIT/(LOSS) AFTER INCOME TAX
TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit/(loss) after income tax 737,251 (2,081,624)
Depreciation 28,381 31,924
---------------------------------
765,632 (2,049,700)
Movements in working capital:
Decrease/(increase) in receivables 36,399 (87,883)
Increase/(decrease) in payables 173,544 (328,654)
(Decrease)/increase in provisions (32,598) 27,188
(Decrease)/increase in reserves (1,522,857) 1,462,534
---------------------------------
Net cash outflows from operating activities (579,880) (976,515)
---------------------------------
---------------------------------
21. COMMITMENTS FOR EXPENDITURE
Operating leases
Non-cancellable operating lease rentals are payable as
follows:
Due within one year 19,260 19,260
Due beyond one year and within five years 19,321 38,643
---------------------------------
38,581 57,903
---------------------------------
---------------------------------
The Company leases vehicles under non-cancellable operating leases expiring within five years. The Company
also has leases which generally provide the Company with a right of renewal at which time all terms are
renegotiated. Lease payments comprise a base amount plus an incremental contingent rental.
22. FINANCIAL INSTRUMENT DISCLOSURES
The Company's activities expose it to a variety of financial risks: market risk (including currency risk,
interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise adverse affects on the
financial performance of the Company. The Company uses different methods to measure different types of risk
to which it is exposed. These methods include sensitivity analysis in the case of interest rates and other
price risks and aging analysis for credit risk.
Risk management is carried out by the Chief Financial Officer under policies approved by the Board of
Directors. The Chief Financial Officer identifies and evaluates the risks in close cooperation with the
Company's management and Board.
(a) Market risk
(i) Foreign exchange risk
The Company does not have any significant exposure to foreign exchange risk.
(ii) Price risk
The Company in the current year did not have any significant exposure to investment or commodity price risk.
The Company will have exposure to silver price risk if and when mining operations begin. Directors have not
made any determination at this stage as to whether they will consider commodity price hedge arrangements.
(iii) Cash flow and fair value interest rate risk
The Company has exposure to interest rate risk which is the risk that a financial instrument's value will
fluctuate as a result of changes in market interest rates and the effective weighted average interest rates
on those financial assets and the financial liabilities.
The Company policy is to ensure that the best interest rate is received for the short-term deposits. The
Company uses a number of banking institutions, with a mixture of fixed and variable interest rates. Interest
rates are reviewed prior to deposits maturing and re-invested at the best rate.
The interest rate risk is detailed in the table below:
----------------------------------------------------------------------------
Weighted
average
effective Floating Non-
interest interest Fixed interest rate interest
rate rate maturing bearing Total
----------------------------------------------------------------------------
Within 1 Over 1
year year
% $ $ $ $ $
----------------------------------------------------------------------------
2012
FINANCIAL ASSETS
Cash assets 3.8 - 709,348 - 26,035 735,383
Performance guarantee bonds 5.8 - 115,000 - 60,000 175,000
Other financial assets - - - 696,674 696,674
--------------------------------------------------------------
- 824,348 - 782,709 1,607,057
--------------------------------------------------------------
FINANCIAL LIABILITIES
Payables (Current) - (19,260) - (315,665) (334,925)
Payables (Non-current) - - (19,321) - (19,321)
--------------------------------------------------------------
- (19,260) (19,321) (315,665) (354,246)
--------------------------------------------------------------
NET FINANCIAL
ASSETS/(LIABILITIES) - 805,088 (19,321) 467,044 1,252,811
--------------------------------------------------------------
--------------------------------------------------------------
----------------------------------------------------------------------------
Weighted
average
effective Floating Non-
interest interest Fixed interest rate interest
rate rate maturing bearing Total
----------------------------------------------------------------------------
Within 1 Over 1
year year
% $ $ $ $ $
----------------------------------------------------------------------------
2011
FINANCIAL ASSETS
Cash assets 4.8 - 3,281,561 - 90,196 3,371,757
Performance guarantee bonds 6.0 - 50,000 - 70,550 120,550
Other financial assets - - - 1,301,356 1,301,356
--------------------------------------------------------------
- 3,331,561 - 1,462,102 4,793,663
--------------------------------------------------------------
FINANCIAL LIABILITIES
Payables (Current) - (19,260) - (174,718) (193,978)
Payables (Non-current) - - (38,643) - (38,643)
--------------------------------------------------------------
- (19,260) (38,643) (174,718) (232,621)
--------------------------------------------------------------
--------------------------------------------------------------
NET FINANCIAL
ASSETS/(LIABILITIES) - 3,312,301 (38,643) 1,287,384 4,561,042
--------------------------------------------------------------
--------------------------------------------------------------
(b) Reconciliation of net financial assets per statement of financial position:
---------------------------------
2012 2011
$ $
---------------------------------
Net financial assets per above 1,252,811 4,561,042
Property plant & equipment 61,935 47,880
Deferred exploration & development 11,190,929 7,675,327
---------------------------------
Net assets per statement of financial position 12,505,675 12,284,249
---------------------------------
---------------------------------
(c) Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security in respect of
recognised financial assets, is the carrying amount as disclosed in the statements of financial position and
notes to the financial statements.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through
adequate amount of committed credit facilities and the ability to close out market positions. The Company
manages liquidity risk by continuously monitoring forecast and actual cash flows matching maturity profiles
of financial assets and liabilities. Surplus funds are generally only invested in instruments that are
tradable in highly liquid markets.
The Company at trading date had deposits which mature within three months and cash at bank. Due to the cash
available to the Company there is no use of any credit facilities at balance date.
(e) Net fair values
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes. The net fair values of the financial assets and financial
liabilities approximate their carrying values.
No financial assets and financial liabilities are readily traded on organised markets.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are
disclosed in the statements of financial position and in the notes to the financial statements.
(f) Sensitivity analysis
The Company has not performed a sensitivity analysis on price risk and its impact on current year results
and equity which could result from a change in this risk as the likely impact is insignificant given the
minimal revenue generated from gold sales during the year.
-----------------------------
2012 2011
Cents Cents
-----------------------------
23. EARNINGS PER SHARE
Basic earnings per share 0.01 (0.02)
Diluted earnings per share 0.01 (0.01)
-----------------------------
Number Number
-----------------------------
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the
denominator in calculating basis earnings per share and
alternative basis earnings per share 136,730,541 106,124,631
-----------------------------
-----------------------------
Weighted average number of ordinary shares and potential
ordinary shares used as the denominator in calculating
diluted earnings per share and alternative diluted earnings
per share 162,763,718 142,007,466
-----------------------------
-----------------------------
-----------------------------
$ $
-----------------------------
Reconciliation of earnings used in calculating earnings per
share
Earnings used in calculating basic and diluted earnings per
share 737,251 (2,081,624)
-----------------------------
-----------------------------
24. LEASED ASSETS
The Company leases vehicles under non-cancellable operating leases. The leases provide the Company with the
option to purchase equipment at a beneficial price. At 30 June 2012, the net carrying amount of leased
vehicles was $38,581 (2011: $57,903).
25. EVENTS SUBSEQUENT TO REPORTING DATE
Other than the raising of additional capital, 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.
26. COMPANY DETAILS
The registered office and principal place of business of the Company is
Silver Mines Limited
Level 5
17-19 Bridge Street
Sydney NSW 2000
Australia
Tel: +61 2 9253 0900
Fax: +61 2 9253 0901
SILVER MINES LIMITED
DIRECTORS' DECLARATION
The directors declare that:
1 the financial statements and notes, as set out on pages 15 to 39 are in accordance with the Corporations
Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the financial position as at 30 June 2012 and of the
performance for the year ended on that date of the Company and economic entity;
2 the Chief Executive Officer and Chief Finance Officer have each declared that:
(a) the financial records of the Company for the financial year have been properly maintained
in accordance with section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the Accounting
Standards; and
(c) the financial statements and notes for the financial year give a true and fair view;
3 in the director's 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.
This declaration is made in accordance with a resolution of the Board of Directors.
David Sutton
Director
29 August 2012
Independent Auditor's Report
To the members of
Silver Mines Limited
A.C.N. 107 452 942
INDEPENDENT AUDIT REPORT
To the members of Silver Mines Limited:
Report on the financial report
We have audited the accompanying financial report of Silver Mines Limited (the Company), which comprises the
Statement of Financial Position as at 30 June 2012 and the Statement of Comprehensive Income, Statement of Changes
in Equity and Statement of Cash Flows for the year ended on that date, a summary of significant accounting policies,
other explanatory notes and the directors' declaration.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal controls relevant to the preparation and fair presentation of the 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. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial
report, comprising the financial statements and notes, complies with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of
material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of Silver
Mines Limited on 29 August 2012, would be in the same terms if provided to the directors as at the date of this
auditor's report.
Auditor's opinion
In our opinion the financial report of Silver Mines Limited is in accordance with the Corporations Act 2001,
including:
(a) giving a true and fair view of the company's financial position as at 30 June 2012 and of their performance
for the year ended on that date; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
The financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the remuneration report
We have audited the Remuneration Report included on pages 10 to 12 of the directors' report for the year ended 30
June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor's Opinion:
In our opinion the Remuneration Report of Silver Mines Limited for the year ended 30 June 2012, complies with
section 300A of the Corporations Act 2001.
Moyes Yong & Co Partnership William M Moyes - Partner
Chartered Accountants 29 August 2012
Level 7, Norwich House
6 O'Connell Street
Sydney NSW 2000
SILVER MINES LIMITED
CORPORATE DIRECTORY
Directors Auditors
David Henty Sutton - Non Executive Chairman Moyes Yong & Co
Malcolm Harvey Bird - Non Executive Director Level 7
Charles David Straw - Managing Director Norwich House
6 O'Connell Street
Company Secretary Sydney NSW 2000
Kevin Martin Lynn Tel: +61 2 8256 1100
Fax: +61 2 8256 1111
Australian Company Number
107 452 942 Company's Solicitor
Macpherson + Kelly
Registered Office Level 11
Level 5 56 Pitt Street
17-19 Bridge Street Sydney NSW 2000
Sydney NSW 2000 Tel: +61 2 8298 9533
Tel: +61 2 9253 0900 Fax: +61 2 9252 6276
Fax: +61 2 9253 0901
E-mail: info@silverminesltd.com.au
Website: www.silverminesltd.com.au
Bank
National Australia Bank Limited
255 George St
Sydney NSW 2000
Share Registry
Boardroom Pty Limited
Level 7
207 Kent Street
Sydney NSW 2000
Tel : +61 2 9290 9600
Fax : +61 2 9279 0664
Email: enquiries@boardroomlimited.com.au