31st Mar 2006 09:53
Albidon Limited31 March 2006 Suite 1 Hillway House 141 Broadway Nedlands 6009 Western Australia ARBN 107 288 755 Albidon Limited Tel:+61 8 9389 6300 Fax:x +61x8x9389 6400 Email: [email protected] ASX Code: ALB AIM Code: ALD via electronic lodgement FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2005 http://www.rns-pdf.londonstockexchange.com/rns/7392a_-2006-3-31.pdf Contents Page Directors' report 1 Consolidated income statement 7 Consolidated balance sheet 8 Consolidated cash flow statement 9 Consolidated statement of changes in equity 10 Notes to the financial statements 12 1 General information 12 2 Summary of significant accounting policies 12 3 Segment information 19 4 Revenues and expenses 20 5 Income tax expense 21 6 Loss per share 22 7 Plant and equipment 23 8 Exploration and evaluation expenditure 24 9 Trade and other receivables 24 10 Prepayments 24 11 Loans to other entities 25 12 Cash and cash equivalents 25 13 Trade and other payables 25 14 Provisions 26 15 Share capital 26 16 Interest in joint ventures 28 2917 Investments in subsidiaries 18 Available for sale investments 29 19 Financial instruments 29 20 Commitments 30 21 Related party transactions 31 22 Events after the balance sheet date 32 23 Comparatives 32 Directors' declaration 33 Independent audit report 34 DIRECTORS REPORT Your directors present their report on the consolidated entity consisting ofAlbidon Limited and the entities it controlled at the end of, or during, theyear ended 31 December 2005. DIRECTORS The directors of the Company at any time during or since the end of thefinancial year are as follows: Mr. Richard (Dick) Potts Chairman, Director ARSM, Bsc Mining Engineering, FIMM, FAusIMM, CEng (Age: 61) Mr Potts has 37 years experience in the minerals industry and has worked inZambia, South Africa, Oman, UK and Australia. He is a mining engineer byprofession and has had broad experience across the minerals spectrum fromexploration to finished product. He has held senior management or consultingpositions with a number of mining companies including Rio Tinto, Pasminco andMount Isa Mines. Mr Potts' experience includes overall management responsibility for a largeintegrated base metal mine-concentrator-smelter facility and extensiveinvolvement in due diligences, operational reviews, technical reviews andfeasibility studies. He has also worked in the area of business development withresponsibility for strategic and business planning, mine to market optimisation,logistics and major project management. Mr Potts spent the formative part of his life in Zambia and South Africa and hasa good understanding of the requirements to bring projects into operation insouthern Africa. Mr. Dale Rogers (was appointed Managing Director of the Company on 1 December2005) B.Eng. (Hons) Mining (Age: 42) Mr Rogers is a mining engineer by profession with 20 years experience in bothunderground and open pit mining, processing and smelting operations. Mr Rogershas a broad range of experience in the base metals, gold and diamond industries. His experience has included management roles at WMC's (now BHP Billiton's)operations in Kambalda, Kalgoorlie, Mt Keith and their Kalgoorlie smelter inWestern Australia. Subsequent to this Mr Rogers was responsible for themanagement of several gold mining operations. In 2002 he formed his ownconsulting group to provide advice on mining operations, management services,feasibility studies, due diligence and acquisitions. More recently Mr Rogerswas a member of the Reliance Mining team that successfully developed theBeta-Hunt nickel project, culminating in the takeover of Reliance byConsolidated Minerals and has provided advice to Avoca Resources for severalyears. Mr Rogers was responsible for the mining engineering component of the MunaliScoping Study and has been managing the Bankable Feasibility Study on theEnterprise Nickel Project at Munali since mid 2005. Dr. Donal Windrim Executive Director BSc (Hons) Trinity College Dublin, PhD Australian NationalUniversity (Age: 48) Dr Windrim has over 20 years' experience in the international mineralexploration and mining industry, principally in Australia and Africa. He hasconducted exploration for base metals, precious metals and diamonds in North andSouth America, Europe, India, Africa and Australia. Nickel has been a major focus and Dr Windrim's experience ranges from continentand regional scale evaluations, through delineation drilling of mining reservesto assisting with feasibility studies. He has held technical or managementpositions with Elf Aquitaine and BHP Minerals International (now BHP Billitonplc). Dr Windrim's efforts in the past six years have been directed at generating anddeveloping mineral exploration projects based on his extensive knowledge of thegeology and prospectivity of the regions of Africa targeted by Albidon. Thiswork combined with the Company's exploration database formed the basis of theCompany's current projects. Dr Windrim has responsibility for directing the exploration programs to fullyevaluate the discovery potential of this portfolio. In relation to Africa, Dr Windrim has extensive experience of managingexploration projects in Zambia, Tanzania, Malawi, Botswana, Tunisia, Namibia andMozambique. Mr. Alasdair Cooke Executive Director BSc (Hons) University of Western Australia (Age: 41) Mr Cooke is a geologist with 17 years experience in the resource explorationindustry throughout Australia and internationally. He has wide experience as anindependent consultant specialising in structural geology and resource studiesas well as having worked in the areas of commercial strategy and riskmanagement. He has held senior positions in World Geoscience Corporation inAustralia and North America as well as BHP's international project generationgroup and new business and reconnaissance group. Since 1997 Mr Cooke has beeninvolved in the evaluation and development of resource projects in variousprivate and public resource companies. Mr Cooke is currently the Managing Director of Exco Resources. Mr. Craig Burton Non Executive Director Bjuris, LLB University of Western Australia MICD (Age:43) Mr Burton, a corporate solicitor by training, has spent the last 12 yearsinvesting in and financing resource projects, principally through public listedvehicles. He has undertaken financing activities in both Australia and Canadafor resource projects covering a variety of commodities located in Australia,southern Africa and central Europe. Mr Burton is a principal of Verona Capital, a private venture capital group. Heis a director of Mirabela Nickel Limited, Exco Resources NL, Golden GatePetroleum Limited and Halcyon Group Limited. He is a member of the AustralianInstitute of Company Directors. Christopher John Gilbert De Guingand Non Executive Director FCPA. Principal, Mineral Commerce Services Pty Ltd (Age:73) Mr de Guingand has had a long career in the mining industry, having beeninvolved in financial or marketing roles as an executive, trader, director orconsultant. He has held senior management positions in marketing non-ferrousmetals and iron ore for CRA Metals Exploration (now QNI) for over 20 years. In 1982 he formed his own consultancy Mineral Commerce Services P/L (MCS). MCSadvises on the marketing and logistic aspects of projects involving base metals(including nickel, copper, zinc and cobalt), phosphate rock, fertilizers, iron,chrome and manganese ores. MCS manages the shipment of nickel concentrates forseveral companies and Mr de Guingand has a good working knowledge of nickelprocesses and refined nickel products. Michael Brook Non Executive Director BSc (Hons) University of Wales, Cardiff (Mining Geology)MAusIMM, MIMM, Chartered Engineer (UK) (Age: 47) Mr Brook is a geologist who has worked in Australia, North America and Africa.He was employed by Mt Isa Mines Limited (MIM) (now Xstrata) from 1982 to 1992including the position of Chief Geologist at MIM's copper mining operations andhe also worked as part of a project team on the Ernest Henry deposit. AfterMount Isa, Mr Brook worked for 9 years as a resources analyst with InstitutionalBroking Firm JB Were & Son, specialising in the research of emerging resourcecompanies. In 2001 Mr Brook joined AFL Management and is now an executive director of AFLManagement Limited, the company that supplies investment advice and managementservices to AFL, Albidon's largest Shareholder. DIRECTORS AND COMMITTEE MEETINGS The number of directors' meetings and number of meeting attended by each of thedirectors of the Company during the financial year are: Director A B Mr. Richard Potts 7 8Mr. Dale Rogers 1 1Mr. Craig Burton 6 8Mr. Alasdair Cooke 7 8Dr. Donal Windrim 8 8Mr. Christopher De Guingand 8 8Mr. Michael Brook 7 8 A - Number of meetings attended B - Number of meeting held during that time the director held office during theyear The number of audit committee meetings and number of meetings attended by itsmembers during the financial year are: Member A BMr. Christopher De Guingand 2 2Mr. Craig Burton 1 2Mr. Nicholas Day 2 2 A - Number of meetings attended B - Number of meeting held during that time the director held office during theyear The number of remuneration committee meetings and number of meetings attended byits members during the financial year are: Member A B Mr. Craig Burton 2 3Mr. Michael Brook 3 3Mr. Nicholas Day 3 3 A - Number of meetings attended B - Number of meeting held during that time the director held office during theyear REVIEW AND RESULTS OF OPERATIONS The principal activity of the consolidated entity during the period wasexploration and evaluation of mineral interests. The operating loss after incometax for the twelve months ended 31 December 2005 was AUD$3,882,829 (31 December2004 AUD$2,324,604). REMUNERATION REPORT The remuneration report outlines the remuneration arrangements which were inplace during the year, and remain in place as at the date of this report. Remuneration Policy Albidon Limited aims to ensure that the level and composition of remuneration ofits directors and executives are sufficient and reasonable for the sector inwhich the Company operates. Albidon Limited has adopted a Remuneration Policy toattract and retain talented and motivated personnel in order to achieve enhancedperformance of the Company. A remuneration committee has been implemented toreport all proposed arrangements to the Board. The Board is responsible fordetermining and reviewing compensation arrangements for the Directors and theexecutive team. Executive Directors The Remuneration of Albidon Limited's Executive Directors comprises some or allof the following elements: fixed salary; short term incentive bonus based onperformance; long term incentive share and/or option scheme; and other benefitsincluding employment insurances and superannuation contributions. In relationto the payment of bonuses, share options and other incentive amounts, discretionis exercised by the Board having regard to the overall performance of theCompany and of the relevant individual during the period. Non-Executive Directors Albidon Limited's Non-Executive Directors are remunerated with a cash fee. Thereis currently no scheme to provide performance based bonuses or retirementbenefits to Non-Executive Directors. Non-Executive Directors typically do notparticipate in equity or option schemes of the Company, however given AlbidonLimited's size, focussed nature of business and shareholding structure, issuesof share options to Non-Executive Directors have previously been, and may on thefuture be, approved by shareholders to enhance overall shareholder wealthcreation. Directors Cash Cash Directors Salary Bonus Fees Super- Options Total annuationChairman Mr. Richard Potts - - - $80,000 $3,198 $83,198Non-ExecutiveMr. Michael Brook - - - $30,000 - $30,000Mr. Christopher De Guingand - - - $30,000 $3,198 $33,198Mr. Craig Burton - - - $40,000 - $40,000ExecutiveMr. Dale Rogers $20,000 - $1,800 - - $21,800Dr. Donal Windrim $200,000 $50,000 $22,500 - $3,198 $275,698Mr. Alasdair Cooke - - - $32,500 - $32,500 OPTIONS At the date of this report, the number of options over un-issued ordinary sharesof the Company, held by each directors of the Company is as follows: Director Options Exercise Expiry Date Price (A$) Mr. Richard Potts 500,000 0.60 30/6/07Mr. Dale Rogers - - -Mr. Craig Burton - - -Mr. Alasdair Cooke - - -Dr. Donal Windrim 500,000 0.60 30/6/07Mr. Christopher De Guingand 500,000 0.60 30/6/07Mr. Michael Brook - - - DIRECTORS INTERESTS The relevant interest of each director in the share capital, as notified by thedirectors to the Australian Stock Exchange and Alternative Investment Market, atthe date of this report is as follows: Director Ordinary Shares Mr. Richard (Dick) Potts 20,000Mr. Dale Rogers 50,000Mr. Craig Burton 5,000,000Mr. Alasdair Cooke 5,000,000Dr. Donal Windrim 7,000,000Mr. Christopher De Guingand 50,000Mr. Michael Brook - (i) Craig Burton through director related entities, beneficially owned 5,000,000 shares (ii) Alasdair Cooke directly and through director related entities, owned 5,000,000 shares (iii) Donal Windrim directly and through director related entities, owned 7,000,000 shares (iv) Christopher De Guingand directly and through director related entities, owned 50,000 shares (v) Richard Potts directly owned 20,000 shares (vi) Dale Rogers directly owned 50,000 shares LIKELY DEVELOPMENTS The Company will pursue activities consistent with its corporate objective andthose of its joint venture partners. Further information about likely developments in the operations of the Companyand the expected results of those operations in the future financial years hasnot been included in this report because disclosure would be likely to result inunreasonable prejudice to the Company. CORPORATE HIGHLIGHTS • BHP Billiton confirmed it will continue the planned explorationprogram and budget commitment under the Exploration Cooperation Agreementoperated by WMC prior to the takeover by BHPB • In October 2005, A$13 million was raised through a placement ofshares to institutional investors in the UK, Canada and Australia for thepurpose of accelerating the nickel development and exploration programs atMunali and elsewhere • In February 2005, 800,000 unlisted options (exercisable at AUD$0.60on or before 30 June 2007) which were subject to escrow on the Australian StockExchange, were released from Escrow. Of these options 66% are still to vestwith 33 % vesting 1 January 2006 and the balance vesting 1 January 2007 • 1,000,000 unlisted options (exercisable at AUD$0.60 on or before 30June 2008) were allocated to employees and contractors on 4 April 2005 • 300,000 unlisted options (exercisable at AUD$0.60 on or before 30April 2008) were allocated to contractors on 20 July 2005 • 400,000 unlisted options (exercisable at AUD$0.75 on or before 30June 2008) were allocated to contractors 22 November 2005 • 200,000 unlisted options (exercisable at AUD$0.60 on or before 30June 2007) lapsed due to the termination of consultancy services on 22 December2005 • 200,000 unlisted options (exercisable at AUD$0.60 on or before 30June 2008) lapsed due to the termination of consultancy services on 22 December2005 CAPITAL STRUCTURE Total Shares 89,368,000 Options Unlisted Options (expiring 30 June 2006 USD 0.20) 5,000,000Unlisted Options (expiring 30 June 2007 AUD 0.60) 2,600,000Unlisted Options (expiring 30 June 2008 AUD 0.60) 800,000Unlisted Options (expiring 30 April 2008 AUD 0.60) 300,000Unlisted Options (expiring 30 June 2008 AUD 0.75) 400,000Total Options 9,100,000 This report is made in accordance with a resolution of the directors. Dale Rogers Managing Director Perth 31 March 2006 12 months 14 months to to 31 December 31 December 2005 2004 Continuing Operations Notes $AUD $AUD Revenue 4(a) 309,874 273,757 Staff costs (1,184,524) (637,746) Depreciation and amortisation (24,141) (5,974) Exploration & evaluation expenditure written (1,756,690) (1,882,628) off Other expenses 4(b) (1,227,348) (72,013) Loss before income tax (3,882,829) (2,324,604) Income tax expense 5 - - Loss for the period (3,882,829) (2,324,604) Loss attributable to equity holders of the (3,882,829) (2,324,604) parent Loss per share (expressed in $AUD per share) - basic 6 (0.05) (0.04) - diluted 6 (0.05) (0.04) 31 December 31 December 2005 2004 Notes $AUD $AUD ASSETSNon-current assetsPlant and equipment 7 136,290 43,948Exploration & Evaluation Expenditure 8 12,524,714 4,060,475Total non - current assets 12,661,004 4,104,423Current assetsTrade and other receivables 9 517,464 976,994Loans to other entities 11 860,745 -Prepayments 10 258,806 85,432Cash and cash equivalents 12 10,594,172 9,883,376Total current assets 12,231,187 10,945,802Total assets 24,892,191 15,050,225 EQUITY AND LIABILITIESCapital and reserves attributable to the Company'sequity holdersIssued capital 15(a) 1,223,274 875,673Share premium reserve 15(a) 30,877,745 16,806,932Capital raising costs 15(a) (2,233,444) (1,431,374)Share capital 29,867,575 16,251,231Option premium reserve 15(b) 624,419 244,955Foreign currency translation reserve 15(c) (24,536) 350,889Accumulated loss (7,268,422) (3,385,593)Total shareholders' equity 23,199,036 13,461,482 LIABILITIESCurrent liabilitiesTrade and other payables 13 1,621,248 1,570,628Provisions 14 71,907 18,115Total liabilities 1,693,155 1,588,743 Total equity and liabilities 24,892,191 15,050,225 12 months 14 months to to 31 December 31 December 2005 2004 $AUD $AUDCash flows from/(used in) operating activitiesPayments to suppliers (exploration) (9,384,293) (3,870,604)Payments to suppliers (administration) (851,773) (430,272)Payments to employees (762,391) (354,222)Interest received 261,692 261,216Net cash flows used in operating activities (10,736,765) (4,393,882)Cash flows from/(used in) investing activitiesPurchase of property, plant and equipment (121,009) (49,923)Loan to Capital Drilling (1,171,570) -Repayments by Capital Drilling 371,548 -Net cash flows used in investing activities (921,031) (49,922)Cash flows from/(used in) financing activitiesProceeds from issue of ordinary shares 12,758,810 14,734,008Share issue transaction costs (673,320) (1,406,417)Net cash flows from financing activities 12,085,490 13,327,591 Net increase in cash and cash equivalents 427,694 8,883,786 Effects of exchange rate changes 283,102 39,504 Cash and cash equivalents at beginning of period 9,883,376 960,086Cash and cash equivalents at end of period 10,594,172 9,883,376 For the 12 months ended 31 December 2005 Issued Share Capital Option Foreign Accumulated Total premium raising cost currency (loss) Capital Premium translation Equity reserve $AUD $AUD $AUD $AUD $AUD $AUD $AUD At 1 January 875,673 16,806,932 (1,431,374) 244,955 350,889 (3,385,593) 13,461,4822005 Unrealisedcurrencytranslation 59,969 1,599,635 (128,749) 24,244 (375,425) - 1,179,674differenceontranslationtopresentationcurrency Net loss - - - - - (3,882,829) (3,882,829)fromordinaryactivities Issue of 287,632 12,471,178 (673,321) - - - 12,085,489sharecapital (30,000,000shares atGBP 20 pence/ AUD 50cents) Share Based - - - 355,220 - - 355,220Payments At 31 1,223,274 30,877,745 (2,233,444) 624,419 (24,536) (7,268,422) 23,199,036December2005 For the 14 months ended 31 December 2004 Issued Share Capital Option Foreign Accumulated Total premium raising cost currency (loss) Capital Premium translation reserve $AUD $AUD $AUD $AUD $AUD $AUD $AUD At 1 506,382 2,759,231 - - 142,150 (1,060,989) 2,346,774November2003 Unrealisedcurrencytranslation (49,159) (267,858) - - 208,739 - (108,278)differenceontranslationtopresentationcurrency Net loss - - - - (2,324,604) (2,324,604)fromordinaryactivities Issue of 383,839 12,795,609sharecapital 13,818,187 (1,406,417) - - -(30,000,000shares atGBP 20 pence/ AUD 50cents) Share Based - - (24,957) 244,955 - 219,998Payments Exercise of 34,611 497,372 - - - 531,983options At 31 875,673 16,806,932 (1,431,374) 244,955 350,889 (3,385,593) 13,461,482December2004 Notes to the financial statements 1 General information The consolidated financial statements of Albidon Limited for the year ended 31 December 2005 were authorised for issuein accordance with a resolution of the Directors dated 23 March 2006. The comparative information is for the 14 monthperiod ended 31 December 2004. Albidon Limited ('the Company') is a company incorporated in the British Virgin Islands, on 11 April 2000 whose sharesare publicly traded. It's registered place of business is Suite 1, Hillway House, 141 Broadway, Nedlands, WesternAustralia 6009. The principal activities of the Company and its subsidiaries ('the Group') are described in note 3. The Company and the Group has five employees as at 31 December 2005 (three employees as at 31 December 2004). 2 Summary of significant accounting policies a) Basis of preparation The consolidated financial statements of Albidon Limited and all its subsidiaries contained in this report have beenprepared in accordance with the International Financial Reporting Standards ("IFRS") in effect as at balance date. The consolidated financial statements have been prepared on a historical cost basis (except for available for salefinancial assets, which are carried at fair value). Recently issued or amended Australian Accounting Standards not yet effective and not adopted for the year ended 31December 2005, are not expected to result in significant accounting policy changes. Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except the group has adoptedthose new/revised standards mandatory for financial years beginning on or after 1 January 2005. The principal effectsof the adoption of these standards are discussed below. IFRS 2 'Share-Based Payment' IFRS 2 'Share-based Payment' requires an expense to be recognised where the Group buys goods or services in exchangefor shares or rights over shares ('equity-settled transactions'), or in exchange for other assets equivalent in valueto a given number of shares or rights over shares ('cash-settled transactions'). The main impact of IFRS 2 on the Groupis the expensing of employees' and directors' share options and other share based incentives by using an option-pricingmodel, further details of which are given in note 15. Options granted have been valued using a Black Scholes option pricing model, which takes into account factors includingthe option exercise price, the volatility of the underlying share price, the risk-free interest rate, expecteddividends on the underlying share, current market price of the underlying share and the expected life of the option.Each option is valued based on these factors using the information existing as at grant date. IFRS2 is mandatory for accounting years beginning on or after 1 January 2005 and has been applied retrospectively Albidon has taken advantage of the transitional provisions of IFRS 2 in respect of equity-settled awards and hasapplied IFRS 2 only to equity settled awards granted after 7 November 2002 that had not vested before 1 January 2005. The effect of the revised policy has been to increase consolidated accumulated losses as at 1 January 2005 byA$219,998. In addition, the current year loss has increased by $355,220 (2004: $219,998) due to an increase in theemployee benefits expense. The effect of the revised policy due to the adoption of IFRS 2 on basic and diluted EPS is as follows: - For the 2005 period increase in basic loss per share by (0.0048) (2004: (0.0035); - For the 2005 period increase in diluted loss per share by (0.0048) (2004: (0.0035). IAS 7 'Cash Flow Statements' (amended 2003) During the year, the Group elected to disclose its cash flows from operating activities using the direct method thatrequires the disclosure of gross cash receipts and gross cash payments to be disclosed. This accounting policy has beenadopted retrospectively and the comparative disclosures have been amended accordingly. Previously the Group reportedcash flows from operating activities using the indirect method. The Group has elected to change its accounting policyfor reporting operating cash flows as it believes that using the direct method conveys more relevant and reliableinformation to financial report users about the effects of transactions. Additionally, IAS 7 encourages the use of thedirect method for the reporting of operating cash flows. The Group believes that this change in accounting policy hasresulted in more meaningful disclosures being present and has not affected the measurement of any items in thefinancial statements. Adoption of other International Financial Reporting Standards In addition to the standards referred to above, the Group has reviewed the following new and revised standards in lightof the group's existing accounting policies: IAS 1 'Presentation of Financial Statements'; IAS 2 'Inventories'; IFRS 3 'Business Combinations'; IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'; IAS 10 'Events after the Balance Sheet Date'; IAS 16 'Property, Plant and Equipment'; IAS 17 'Leases'; IAS 21 'The Effects of Changes in Foreign Exchange Rates'; IAS 24 'Related Party Disclosures'; IAS 27 'Consolidated and Separate Financial Statements'; IAS 28 'Investments in Associates'; IAS 31' Interests in Joint Ventures'; IAS 32 'Financial Instruments: Disclosure and Presentation'; IAS 33 'Earnings per Share'; IFRS 5 'Non-Current Assets Held For Sale and Discontinued Operations'; IAS 36 'Impairment of Assets'; IAS 38 'Intangible Assets'; IAS 39 'Financial Instruments: Recognition and Measurement'; and IAS 40 'Investment Property'. No material differences arose between the above standards and the Group's existing accounting policies. b) Basis of consolidation The consolidated financial statements comprise the financial statements of Albidon Limited and its subsidiaries for theyear ended 31 December 2005. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, usingconsistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that mayexist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions,have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidatedfrom the date on which control is transferred out of the Group. All subsidiaries have been owned by the Group sincetheir date of incorporation. c) Foreign currency translation The functional currency of the Company and each of the subsidiaries is US dollars. This represents the currency of theprimary economic environment in which the Company and each of the subsidiaries operates. The Directors have resolvedto present the consolidated financial statements in Australian dollars ("the presentation currency"), since thisrepresents the currency of the country in which the Company is currently tax resident. On initial recognition a foreign currency transaction is recorded in the functional currency at the spot rate at thedate of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to thefunctional currency at the rate of exchange ruling at the balance sheet date. All exchange differences are taken tothe income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the date of the original transactions. The assets, liabilities and equity of the Group are translated to the presentation currency of the Group at the rate ofexchange ruling at the balance sheet date. The income statement of the Group is translated to the presentationcurrency at the weighted average exchange rate for the year. The exchange differences arising on the retranslation tothe Group's presentation currency are taken directly to a separate component of equity. d) Exploration and Evaluation Expenditure Costs carried forward Costs arising from exploration and evaluation activities are carried forward provided such costs are expected to berecouped through successful development, or by sale, or where exploration and evaluation activities have not, atreporting date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverablereserves. Costs carried forward in respect of an area of interest that is abandoned are written off in the year in which thedecision to abandon is made. Impairment Exploration and Evaluation Expenditure is assessed for impairment when facts and circumstances suggest that thecarrying amount of Exploration and Evaluation Expenditure may exceed its recoverable amount. e) Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with anoriginal maturity of three months or less. For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents consist of cash and cashequivalents as defined above, net of outstanding bank overdrafts. f) Trade and other receivables Trade receivables, are recognised and carried at original invoice amount less an allowance for any uncollectibleamounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debtsare written off when identified. g) Trade and other payables Liabilities for trade creditors and other payables are carried at cost which is the fair value of the consideration tobe paid in the future for goods and services received, whether or not billed to the consolidated entity. h) Revenue Revenue is recognised to the extent that it is probable that the economic benefits of ownership will flow to the Groupand the revenue can be reliably measured. The following specific recognition criteria must also be met before revenueis recognised: Interest Revenue is recognised as the interest accrues (using the effective interest rate method that is the rate that directlydiscounts estimated future cash receipts through the expected life of the financial asset) to the net carrying amountof the financial asset. i) Taxes Income Tax Current tax assets and liabilities for the current and prior periods are measured at the amount to be recovered from orpaid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted orsubstantively enacted by the balance sheet date. Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet datebetween the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences: • except where the deferred income tax liability arises from goodwill recognised or the initialrecognition of an asset or liability in a transaction that is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, except where the timing of the reversal of the temporary difference can becontrolled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assetsand unused tax losses, to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences, carry-forward of unused tax assets and unused tax losses can be recognised: • except where the deferred income tax asset relating to the deductible temporary difference arisesfrom the initial recognition of an asset or liability on a transaction that is not a business combination and, at thetime of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred income tax assets are only recognised to the extent that it isprobable that the temporary differences will reverse in the foreseeable future and taxable profit will be availableagainst which the temporary difference can be recognised The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent thatit is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred incometax asset to be recognised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent thatit has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that apply to the period when the asset isrecognised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off currenttax assets against current tax liabilities and the deferred taxes to the same taxable entity and the same taxationauthority. Goods and Services Tax and Value Added Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) and value added tax(VAT), except where the amount of GST/VAT incurred is not recoverable from the relevant tax authority. In thesecircumstances the GST/VAT is recognised as a part of the cost of acquisition of the asset or as part of an item of theexpense. Receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from,or payable to, the taxation authority is included as a current asset or liability in the statements of financialposition. j) Interest in joint ventures The Group's interest in its joint ventures is accounted for by proportionate consolidation, which involves recognizinga proportionate share of the joint ventures' assets, liabilities, income and expenses with similar items in theconsolidated financial statements on a line-by-line basis. k) Investments All investments are initially recognised at the fair value of the consideration given and including acquisition chargesassociated with the investment. l) Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which theasset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair valueless costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levelsfor which there are separately identifiable cash flows (cash generating units). m) Other financial assets Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in anactive market. They arise when the Group provides money, goods or services directly to a debtor with no intention ofselling the receivable. They are included in current assets, except for those with maturities greater than 12 monthsafter the balance sheet date which are classified as no-current assets. Loans and receivables are included inreceivables in the balance sheet. Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that areeither designated in this category or not classified in any of the other categories. They are included in non-currentassets unless management intends to dispose of the investment within 12 months of the balance sheet date. n) Segment Information Revenues and expenses are attributable to geographical areas based on the location of the assets producing or incurringthose revenues. o) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation iscalculated on a straight line basis over the estimated useful life of the assets as follows: Plant and equipment - over 2.5 to 3 years Motor Vehicles - over 4 years The carrying value of plant and equipment are reviewed for impairment either annually or when events or changes incircumstances indicate the carrying value may not be recoverable (whichever is earlier). If any such indication existsand where the carrying values of an asset exceed its estimated recoverable amount, the asset is considered impaired andis written down to its recoverable amount. The recoverable amount of plant and equipment is the greater of net sellingprice and value in use. In assessing value in use, the estimated future cash flows are discounted to their presentvalue using a pre-tax discount rate that reflects current market assessment of the time value of money and the risksspecific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expectedto arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated asthe difference between the net disposal proceeds and the carrying amount of the item) is included in the incomestatement in the year the item is derecognised. The assets residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial yearend. p) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and areliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision tobe reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but onlywhen the reimbursement is virtually certain of being received. The expense relating to any provision is presented inthe income statement net of any reimbursement. If the effect of the time value of money is material, provisions aredetermined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and where appropriate, the risks specific to the liability. Where discounting is used, theincrease in the provision due to the passage of time is recognised as a borrowing cost. q) Share-based payment transactions Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions,whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions'). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at whichthey are granted. The fair value is determined by an external valuer using Black Scholes model, further details ofwhich are given in note 15. In valuing equity-settled transactions, no account is taken of any performance conditions,other than a condition linked to the price of the shares of Albidon Limited ('market conditions'). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the yearsin which the performance conditions are fulfilled, ending on the date on which the relevant employees become fullyentitled to the award ('vesting date"). The cumulative expense recognised for equity-settled transactions at eachreporting date until the vesting date reflects the extend to which the vesting period has expired and the number ofawards that, in the opinion of the directors of the Group at that date, will ultimately vest. No expense is recognised for awards that do no ultimately vest, except for awards where vesting is conditional upon amarket condition, which are treated as vesting irrespective of whether or not he market condition is satisfied,provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had notbeen modified. In addition, an expense is recognised for any increase in the value of the transaction as a result ofthe modification, as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and anyexpense not yet recognised for the award is recognised immediately. However, if a new award is substituted for thecancelled award, and designated as a replacement award on the date that is granted, the cancelled and new awards aretreated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings pershare (see note 6). r) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement andrequires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset orassets and the arrangement conveys a right to use the asset. Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of theleased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, atthe present value of the minimum lease payments. Lease payments are apportioned between the finance charges andreduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of theliability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified asoperating leases. Operating lease payments are recognised as an expense in the income statement on a straight-linebasis over the lease term. s) Contributed equity Issued and paid up capital is recognised at the fair value of the consideration received by the Company and is splitbetween issued capital (par value) and share premium reserve. Any transaction costs arising on the issue of ordinaryshares are recognised directly in equity as a reduction of the share proceeds received. t) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reportingdate. These benefits include wages and salaries and annual leave. Employee benefits expenses are recognised againstprofit on a net basis in their respective categories. Contributions made by the Group to employee superannuation funds are charged as an expense when incurred. The Company's policy is to begin to recognize a provision for long service leave after five years of service by anemployee. u) Earnings per share Basic earnings per share ("EPS") is calculated by dividing the net profit attributable to members of the parent entityfor the reporting period, after excluding any costs of servicing (other than ordinary shares and converting preferencesshares as ordinary shares for EPS calculation purposes), by the weighted average number of ordinary shares of theCompany, adjusted for any bonus issue. Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of financing costsassociated with dilutive potential ordinary and the effect on revenues and expenses of conversion to ordinary sharesassociated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutivepotential ordinary shares adjusted for any bonus issue. v) Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based upon historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances. Areas in whichthese estimates and judgements are used include determination of the value of share based payments and carrying valueof capitalised exploration and evaluation expenditure. 3 Segment information The Group operates in one principal area of activity, namely exploration of base metal tenements, and two principalgeographical areas, namely Australia (head office) and Africa (operations). Geographical Segments 12 months to 31 December 2005 Australia Africa Consolidated $AUD $AUD $AUDRevenueOther 249,151 60,723 309,874ResultSegment result (3,321,429) (561,400) (3,882,829) Profit/(loss) before related income tax expense (3,321,429) (561,400) (3,882,829)Income tax expenseNet profit/(loss) (3,321,429) (561,400) (3,882,829) Assets and Liabilities Segment assets 10,587,843 14,304,348 24,892,191 Segment liabilities 634,399 1,058,755 1,693,155 Other segment informationCapital expenditures Mining assets - 7,835,235 7,835,235Non-cash expenses:Depreciation 9,799 18,868 28,667Share-based payments expense 355,220 - 355,220Unrealised/realised foreign exchange gains /(losses) (1,452,108) 1,184,540 (267,568) 3 Segment information (cont.) Geographical Segments 14 months to 31 December 2004 Australia Africa Consolidated $AUD $AUD $AUD RevenueOther 273,766 (9) 273,757ResultSegment result 360,355 (2,684,959) (2,324,604) Profit/(loss) before related income tax expense 360,355 (2,684,959) (2,324,604)Income tax expense - - -Net profit/(loss) 360,355 (2,684,959) (2,324,604) Assets and Liabilities Segment assets 10,520,468 4,529,757 15,050,225 Segment liabilities 233,372 1,355,371 1,588,743 Other segment informationCapital expenditures Mining assets - 4,060,475 4,060,475Non-cash expenses:Depreciation (4,780) (1,194) (5,974)Share-based payments expense (219,998) - (219,998)Unrealised/realised foreign exchange gains /(losses) 1,151,148 (713,549) 437,599 4 Revenue and Expenses (a) Revenue 12 months 14 months to to 31 December 31 December 2005 2004 $AUD $AUD Interest on bank balances 249,151 273,757Interest on loans to related 60,723 -parties 309,874 273,757 (b)Other Expenses Administration Expenses 959,780 509,612Foreign Exchange Loss 267,568 (437,599) 1,227,348 72,013 5 Income tax expense 12 months 14 months to to 31 December 31 December 2005 2004 $AUD $AUD Major components of income tax for the period ended 31 December are: Current income tax charge - - Deferred income tax Relating to origination and reversal of temporarydifferences - -Income tax expense reported in consolidated incomestatement - - A reconciliation of the income tax expense applicable to the loss from operatingactivities before income tax at the statutory income tax rate to income taxexpense at the group's effective income tax rate is as follows: 12 months 14 months to to 31 December 31 December 2005 2004 Loss from operating activities before income tax (3,882,829) (2,324,604) At Albidon Limited's statutory income tax rate (1,164,849) (697,381)of 30% Higher effective tax rate of other countries 17,699 (16,573)Expenditure not deductible for income taxpurposes 69,568 99,937Unrecognised tax losses 1,112,980 614,017 At effective tax rate of nil% - - 6 Loss per share BasicBasic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weightedaverage number of ordinary shares on issue during the year. Diluted Diluted loss per share amounts are calculated by dividing the net loss attributable to ordinary shareholders by theweighted number of ordinary shares outstanding during the year adjusted for the effects of dilutive options. The following reflects the income and share data used in the basic and diluted earnings per share computations: 12 months 14 months to to 31 December 31 December 2005 2004 $AUD $AUD Loss attributable to equity holders of the Company (3,882,829) (2,324,604) Weighted average number of ordinary shares in issue 73,776,219 56,739,429Basic loss per share ($AUD per share) (0.05) (0.04) Diluted Loss used to determine diluted loss per share (3,882,829) (2,324,604) Weighted average number of ordinary share for diluted loss per share 73,776,219 56,739,429Diluted loss per share ($AUD per share) (0.05) (0.04) Weighted average number of ordinary shares for basic loss per share 56,739,429 56,739,429Effect of Dilution - share options - -Weighted average number of ordinary shares adjusted for the effects ofdilution 73,776,219 56,739,429 There have been no other transactions involving ordinary shares or potential ordinary shares since thereporting date and before the completion of these financial statements. Share options are considered antidilutitive. 7 Plant and equipment Plant and Motor vehicles Total equipment $AUD $AUD $AUDAt 1 January 2005, net of accumulated depreciation 16,494 27,454 43,948Additions 121,009 - 121,009Depreciation charge for the period (21,502) (7,165) (28,667)At 31 December 2005, net of accumulated depreciation 116,001 20,289 136,290 At 31 December 2005 Cost 142,284 28,648 170,932 Accumulated depreciation (26,283) (8,359) (34,642)Net carrying amount 116,001 20,289 136,290 Plant and Motor vehicles Total equipment $AUD $AUD $AUDAt 1 November 2003, net of accumulated depreciation - - - Additions 21,274 28,648 49,922Depreciation charge for the period (4,780) (1,194) (5,974)At 31 December 2004, net of accumulated depreciation 16,494 27,454 43,948 At 31 December 2004 Cost 21,274 28,648 49,922 Accumulated depreciation (4,780) (1,194) (5,974)Net carrying amount 16,494 27,454 43,948 At 1 November 2003 Cost - - -Accumulated depreciation - - -Net carrying amount - - - 8 Exploration and evaluation expenditure 31 December 31 December 2005 2004 $AUD $AUD Opening 4,060,475 1,363,941Additions - Munali 7,835,235 2,406,716Foreign exchange gain on translation from functional currency 629,005 289,818Closing balance at 31 December 12,524,714 4,060,475 Exploration and evaluation expenditure relates to the Munali project. The Munali nickel deposit is located approximately 60km south of Lusaka insouthern Zambia. The project is served by road, rail and power infrastructure aswell as water supplies. The deposit was discovered in 1969 and was held by anumber of owners prior to its acquisition by the Group in September 2002. Thetenement covers an area of 737 sq km. The ultimate recoupment of costs carried forward for exploration and evaluationphases is dependent on the successful development and commercial exploitation orsale of the Munali project. 9 Trade and other receivables 31 December 31 December 2005 2004 $AUD $AUD Trade receivables 100,201 590,751 GST/VAT receivables 393,875 368,626 Other receivables 23,388 17,617 517,464 976,994 Trade and other receivables are non-interest bearing and have repayment termswithin one year. 10 Prepayments 31 December 31 December 2005 2004 $AUD $AUD Prepayments 258,806 85,432 11 Other Financial Assets - Loans to Other Entities 31 December 31 December 2005 2004 $AUD $AUD Loans to other Entities 860,745 - Represents the balance loaned to Mr. Brian Rudd (acting for the Capital Drillinggroup) for the purchase of a Schramm 685 drilling rig. This rig is owned andoperated by Mr. Rudd and held under trust by Albidon Zambia Limited. The rig isbeing used at the Company's Munali site in Zambia. The loan bears an interestrate of 7%. Until the loan is repaid, Albidon will deduct against the loan 28%of the amounts invoiced by Mr. Brian Rudd for rig usage. 12 Cash and cash equivalents 31 December 31 December 2005 2004 $AUD $AUD Bank balances 10,518,806 5,353,930 Short term deposits - 4,499,533 Other cash and cash equivalents 75,366 29,913 10,594,172 9,883,376 The weighted average interest rate on Albidon bank accounts in Australia andthroughout Africa is 3.90% At 31 December 2005 the Group has no committed borrowing facilities. (2004:nil) 13 Trade and other payables 31 December 31 December 2005 2004 $AUD $AUD Trade payables 474,259 1,185,981 Accrued expenses 1,146,989 350,270 GST payable - 34,377 1,621,248 1,570,628 Trade payable and accruals are non-interest bearing and normally have repaymentterms within one year. 14 Provisions 31 December 31 December 2005 2004 $AUD $AUD Employee entitlements and salaries 71,907 18,115 71,907 18,115 Movement in the provisions recognised in the balance sheet are as follows 31 December 31 December 2005 2004 $AUD $AUD Opening Provision 18,115 -Movement during the year 53,792 18,115Provisions as at 31 December 71,907 18,115 Employee entitlements relate to annual leave amounts outstanding at 31 December2005. Employees are entitled to four week annual leave per year. 15 Share capital and Reserves 15 (a) Ordinary Shares Issued, called up and fully paid Authorized Number $AUD Number $AUD Ordinary shares of US$0.01 each 5,000,000,000 70,985,420 89,368,000 32,725,438 Number $AUD Issued on incorporation (i) 9,000 128Issued to directors (i) 9,991,000 141,843Issued to directors (i) 10,000,000 141,971Issued to African Lion 15,000,000 2,839,416Issued to unrelated parties (i) 668,000 142,255Capital raising on AIM and ASX (i) 30,000,000 14,202,025Capital raising costs (i) (1,431,374)Issued to African Lion on exercise of options (i) 2,500,000 480,708Issued to Squadron Holdings Limited on exercise of options (i) 200,000 51,275Foreign exchange loss on translation from functional currency (317,016)Balance 31 December 2004 68,368,000 16,251,231Issue through Private Placement (ii) 21,000,000 12,758,810Capital raising costs (ii) (802,070)Foreign exchange gain on translation from functional currency 1,659,604Balance 31 December 2005 89,368,000 29,867,575 Represented by: Share Premium Capital Raising Share Capital Reserve Costs Total $AUD $AUD $AUD $AUD 1,223,274 30,877,745 (2,233,444) 29,867,575 (i) Issued prior to 1 January 2005. (ii) On 28 September 2005, the Company issued 21,000,000 shares through placement at AUD0.62/GBP0.26. Ordinary shares have the right to receive dividends as declared and in the eventof winding up the Company, to participate in the proceeds from the sale of allsurplus assets in proportion to the number of and amounts paid up on sharesheld. The company did not pay a dividend during 2005, nor has any dividend beenproposed up to the reporting date. 15 (b) Options Option Premium ReserveIssued to employees and Contractors 244,955Balance 31 December 2004 244,955Issued to employees and Contractors 355,220Foreign exchange gain on translation from functional currency 24,244Balance 31 December 2005 624,419 The option premium reserve is used to record the options issued as share basedpayments in accordance with the accounting policy set out in Note 1 (q). Opening Granted Exercised LapsedExercise Balance during during duringprice the period the period the period Total No. No. No. US$0.20(i) 5,000,000 - - 5,000,000 AUD $0.60(ii) 2,300,000 - (200,000) 2,100,000 AUD $0.60(iii) 500,000 - - 500,000 AUD $0.60(iv) 1,000,000 - (200,000) 800,000 AUD $0.60(v) 300,000 - - 300,000 AUD $0.60(vi) 400,000 - - 400,000 7,800,000 1,700,000 - (400,000) 9,100,000 Granted 23 October 2003, expire 30 June 2006. Granted 12 February 2004, expire 30 June 2007. Granted 11 May 2004, expire 30 June 2007. Granted 25 March 2005, expire 30 June 2008. Granted 20 July 2005, expire 30 April 2008. Granted 22 November 2005, expire 30 June 2008. All options vest in three equal tranches, each subject to completion of a fullyear of service with the Company, except for (i) which vested at grant date. The company does not have an employee share plan. 15 (c) Foreign currency translation reserve 31 December 2005 31 December 2004 $AUD $AUD Opening balance 350,889 142,150 Currency translation differences (375,425) 208,739 At 31 December (24,536) 350,889 The foreign currency translation reserve is used to record exchange differencesarising from the translation of the financial statements to the presentationcurrency. 16 Interest in joint ventures Albidon and BHP Billiton Ltd Exploration Cooperation Agreement on Projects inAfrica Albidon and BHP Billiton Ltd ('BHPB'), previously WMC Resources Exploration PtyLtd, entered into an agreement on 25 October 2004, for the exploration anddevelopment of a number of Albidon's nickel projects in Malawi, Tanzania, Zambiaand Botswana. Under the agreement an amount of AUD$4 million must be spent byBHPB within an initial period of 20 months. Following these programmes BHPB may earn a 30% interest in each project selectedby it for farm-in by expending US$5 million on the selected project, inclusiveof any amounts expended on the project area during the initial field programmes. BHPB may complete a Pre-feasibility Study (including a JORC Measured Resource)on each selected project to earn a 70% interest. Tati Joint Venture, Botswana The Company entered into an agreement with Gallery Gold Botswana Pty Ltd on 18February 2004 in relation to Gallery's Tati tenements. There are two components to this joint venture, the Tekwane Project, and theTati Regional Project: Tati Regional Project - Albidon has exercised the option to enter farm-inagreements in respect of 4 project areas within the Tati Regional tenements.Albidon may now earn a 50% interest in each project area by spending A$500,000on base metals exploration on the area within three years. A$250,000 of thisshould be spent within 18 months after the commencement of the farm-inagreement. Tekwane Project - Albidon may earn a 65% interest in nickel, other base metalsand platinum group metals in the Tekwane Project Area by spending A$750,000 onbase metals exploration within three years. Trozza Joint Venture, Tunisia Albidon has earned 100% interest in the Trozza joint venture in Tunisia and theExploration Permit is being transferred to the Company from BHP Billiton,subject to a 2.5% NSR royalty which BHPB has sold to International Royalty Corp. Energy Ventures Limited Albidon Limited and Energy Ventures Limited (EVE) have entered into an agreementfor the exploration and development of a number of uranium and coal prospectsthat have been identified on Albidon's tenements in Zambia. Under the Agreement A$500,000 will be spent by EVE within two years to maintainan option to enter a Joint Venture on one or more project areas. Following theseprogrammes EVE may earn a 30% interest in each project area selected by it forfarm-in by expending A$1 million on the selected project area, and may thenproceed to earn a 70% interest by drilling up a JORC Indicated Resource andcompleting a Prefeasibility Study. The Group has no recognised assets or liabilities in relation to these jointventures. 17 Investments in subsidiaries The consolidated financial statements include the financial statements ofAlbidon Limited and the subsidiaries listed in the following table: % Equity interest Country of 31 December 31 December Incorporation 2005 2004 Albidon Zambia Limited Zambia 100 100Tumbili Ventures Limited Tanzania 100 100Albidon Africa Limited British Virgin 100 100 IslandsAlbidon Malawi Limited Malawi 100 100Albidon Mocambique Limitada* Mozambique 100 100Albidon Australia Pty Ltd Australia 100 100Albidon Botswana Pty Ltd Botswana 100 100 * Shares held by subsidiary undertaking. 18 Available for sale investments 31 December 31 December 2005 2004 $AUD $AUD At cost:Investment in Tausi Mining Pty Limited - - Albidon owns 10% of equity in Tausi Mining Pty Limited, a company incorporatedin Western Australia. The wholly owned subsidiary of Tausi Mining Pty Limited,namely Tausi Minerals Company Limited, holds project tenements in Tanzania.These tenements are subject to a joint venture arrangement ("the Luwumbu jointventure"). The asset is carried at fair value and as such, recorded at nil. 19 Financial instruments The Group's financial instruments comprise available-for-sale investments, loansto other entities, trade and other receivables, trade and other payables, andcash. The Group policy is not to enter into any derivative or hedgingtransactions. Fair Values The Directors have performed a review of the financial assets and liabilities asat 31 December 2005 and have concluded that the fair value of those assets andliabilities are not materially different to book values given the short termnature of the instruments. Interest Rate Risk The following table sets out the carrying amount, by maturity, of the Group'sfinancial instruments that are exposed to interest rate risk: Weighted Fixed Floating Non-Interest Average Interest Rate Interest Bearing Interest Rate Rate Total2005 Note $ $ $ $ Financial Assets Cash Assets 12 3.87% 10,594,172 10,594,172 Current Receivables 9 517,464 517,464 Loans to Other Entities 11 7.00% 860,745 860,745 860,745 10,594,172 517,464 11,972,381 Financial Liabilities Payables 13 1,621,248 1,621,248 1,621,248 1,621,248 Weighted Fixed Floating Non-Interest Average Interest Rate Interest Bearing Interest Rate Rate Total2004 Note $ $ $ $ Financial Assets Cash Assets 12 4.40% 5,383,843 5,383,843 Term Deposits 2.01% 4,499,533 4,499,533 Current Receivables 9 976,994 976,994 4,499,533 5,383,843 976,994 10,860,370 Financial Liabilities Payables 13 1,570,628 1,570,628 1,570,628 1,570,628 Interest on financial instruments classified as floating rate is repriced atintervals of less than one year. Credit Risk The Group's maximum exposure to credit risk at the reporting date in relation toeach class of recognised financial assets is the carrying amount of those assetsas indicated in the consolidated balance sheet. The Group holds no derivativefinancial instruments. Foreign currency risk As a result of the Company's operations in Africa the company can be affectedsignificantly by movements in the AUD/USD exchange rates. The Company seeks tomitigate the effect of this exposure by holding the majority of its cash in USD. 20 Commitments As at 31 December 2005 the Group had the following commitments: (a) Albidon Tenement Commitments: Exploration: Not later than 1 year: Botswana $ 183,505 Within 3 years: Tanzania $ 80,878 (b) The following exploration commitments are covered by WMC ResourcesExploration Pty Ltd ('WMCE') under the Cooperation Agreement: Exploration: Not later than 1 year: Tanzania $ 524,459 * Botswana $ 9,855 * (c) Other: Drilling Commitments: Later than 5 years: Zambia $ 165,731 + * Further details of joint venture commitments are provided in note 16 to theaccounts. + Further details of drilling commitment in note 21 to the accounts, RelatedParty Transactions Contingent Assets & Liabilities There are no identified contingent assets or liabilities as at balance date orup to the date of this report. 21 Related party transactions The following transactions were carried out with related parties: Directors' interests Mitchell River Group Pty Ltd, an entity associated with Messrs Cooke, Burton andWindrim provides office space and administrative staff, facilities and servicesto the Company, the costs of which are then reimbursed by the Group. For theyear ended 31 December 2005, these costs totalled $447,264 (2004: $163,441). At31 December 2005 Mitchell River Group Pty Ltd was owed $11,095. Hartree Pty Ltd, a mining consulting firm of which Mr Alasdair Cooke is adirector, has received fees of $47,625 (2004: $55,887) in respect of databaseaccess, field equipment rental and office cost recovery provided to the Companyin the ordinary course of business. During the current year, the Company made a loan of $1,170,570 to Mr Brian Rudd(acting for the Capital Drilling group) for the purchase of a drilling rig, ofwhich AUD$860,745 was outstanding as of 31/12/05. $60,723 interest has beencharged to the loan balance. The rig is owned and operated by Brian Rudd andheld under trust by Albidon Zambia Limited. Rudd and Capital Drilling is anexperienced operator of drilling services in Africa. The rig is being used atthe Company's Munali site in Zambia. The loan bears an interest rate of 7% pa.Until the loan is repaid, Albidon will deduct against the loan 28% of theamounts invoice by Brian Rudd for rig use. Mr C Burton has a 25% equity interestin the Capital Drilling group. Energy Ventures Ltd, a uranium exploration firm of which Mr Craig Burton, MrDonal Windrim and Mr Alasdair Cooke are shareholders, has been invoiced $51,243(2004: nil) in respect of office cost recovery provided by the Company in theordinary course of business. All of the above transactions were entered into on normal commercial terms. Directors The directors of the Group during the year to the date of this report, were asfollows: Dale Rogers (appointed 1 December 2005) Craig Burton Alasdair Cooke Donal Windrim Michael Brook Richard Anthony Potts Christopher de Guingand Directors Remuneration Directors Cash Cash Directors Salary Bonus Fees Super- Options Total annuationChairmanMr. Richard Potts - - - $80,000 $3,198 $83,198Non-ExecutiveMr. Michael Brook - - - $30,000 - $30,000Mr. Christopher De Guingand - - - $30,000 $3,198 $33,198Mr. Craig Burton - - - $40,000 - $40,000ExecutiveMr. Dale Rogers $20,000 - $1,800 - - $21,800Dr. Donal Windrim $200,000 $50,000 $22,500 - $3,198 $275,698Mr. Alasdair Cooke - - - $32,500 - $32,500 Directors' Options Fair Value Exercise Price Expiry Date NumberIssued to directors AUD$32,850 AUD$0.60 30/06/07 1,500,000 There were no share options granted to the directors of the Company during 2005.The outstanding number of share options granted to the directors of the Companyat the end of the year was 1,500,000. 22 Events after the balance sheet date 1,200,000 options were approved to Managing Director Dale Rogers, these are subject to Shareholder approval which isdue to take place in May 2006. Other than the above options, there has not arisen in the interval between the end of financial period and the date ofthese financial statements any item, transaction or event of a material and unusual nature likely, in the opinion ofthe directors of the company, to affect significantly the operations of the entity, the results of these operations, orthe state of affairs of the entity, in future financial periods. 23 Comparatives The corresponding figures for 2004 have been reclassified in order to conform with the presentation for the currentyear. The current year financial statements cover a period of twelve months from 1 January 2005 to 31 December 2005, when theprior period financial statements are for the period 1 November 2003 to 31 December 2004. Directors' Declaration In accordance with a resolution of the board of directors of Albidon Limited, Istate that: In the opinion of the directors: a) the financial statements and notes of the consolidated entity: i. give a true and fair view of the financial position as at 31 December 2005 and the performance for the year ended on that date of the consolidated entity; and ii. comply with International Financial Reporting Standards, b) there are reasonable grounds to believe that the Company will be ableto pay its debts as and when they become due and payable. On behalf of the Board Director31 March 2006 Independent audit report to members of Albidon Limited Scope The financial report and directors' responsibility The financial report comprises the consolidated balance sheet, consolidatedincome statement, consolidated statement of cash flows, consolidated statementof changes in equity and accompanying notes to the financial statements, and thedirectors' declaration for Albidon Limited (the company) and the consolidatedentity, for the year ended 31 December 2005. The consolidated entity comprisesboth the company and the entities it controlled during that period. The directors of the company are responsible for preparing a financial reportthat gives a true and fair view of the financial position and performance of thecompany and the consolidated entity, and that complies with InternationalFinancial Reporting Standards, which comprise standards and interpretationapproved by the IASB, and International Accounting Standards and StandingInterpretations Committee interpretations approved by the IASC that remain ineffect. This includes responsibility for the maintenance of adequate accountingrecords and internal controls that are designed to prevent and detect fraud anderror, and for the accounting policies and accounting estimates inherent in thefinancial report. Audit approach We conducted an independent audit of the financial report in order to express anopinion on it to the members of the company. Our audit was conducted inaccordance with Australian Auditing Standards in order to provide reasonableassurance as to whether the financial report is free of material misstatement.The nature of an audit is influenced by factors such as the use of professionaljudgement, selective testing, the inherent limitations of internal control, andthe availability of persuasive rather than conclusive evidence. Therefore, anaudit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the financialreport presents fairly, in accordance with International Financial ReportingStandards, a view which is consistent with our understanding of the consolidatedentity's financial position, and of its performance as represented by theresults of its operations and cash flows. We formed our audit opinion on the basis of these procedures, which included: • examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and • assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors. While we considered the effectiveness of management's internal controls overfinancial reporting when determining the nature and extent of our procedures,our audit was not designed to provide assurance on internal controls. We performed procedures to assess whether the substance of business transactionswas accurately reflected in the financial report. These and our otherprocedures did not include consideration or judgement of the appropriateness orreasonableness of the business plans or strategies adopted by the directors andmanagement of the company. Independence We are independent of the company, and have met the independence requirements ofAustralian professional ethical pronouncements. Audit opinion In our opinion, the financial report of Albidon Limited gives a true and fairview of the financial position of the consolidated entity comprising the companyand its controlled entities as at 31 December 2005, and of its performance asrepresented by the results of its operations and cash flows for the year endedin accordance with International Financial Reporting Standards. Ernst & Young V W TidyPartnerPerth31 March 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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