28th Feb 2006 12:18
GVM Metals Ltd28 February 2006 FOR IMMEDIATE RELEASE 28 February 2006 GVM METALS LIMITED (i) ABN 98 008 905 388 HALF-YEAR FINANCIAL REPORT 31 DECEMBER 2005 The directors present their report together with the consolidated financialreport for the half-year ended 31 December 2005 and the auditor's review reportthereon: 1. Directors The directors of the Company in office during or since the end of the half-yearare: Name Period of directorship Mr Richard Linnell Appointed 1 August 2001Chairman Mr Simon J Farrell Director since 21 December 2000 (1) Managing Director Mr Peter G Cordin Director since 1 December 1997Director Mr Blair E Sergeant Appointed 30 June 2004Director 2. Results The results of the Consolidated Entity for the half-year ended 31 December 2005after income tax was a loss of $141,447. 3. Review of Activities Highlights • Shares commenced trading on the Alternative Investment Market (AIM) of the London Stock Exchange on 16 December 2005. • Nimag (Pty) Ltd's nickel magnesium alloy business operated ahead of budget despite continued pressure as a result of the strong Rand and reported a profit before interest and tax for the half year of R5,050,000 (A$1,034,000). The Rand strengthened by some 8% against the US Dollar over the six month period. • Following the completion of the scoping study, the Holfontein Coal Project (GVM 49%) is estimated to contain an indicated resource of 56 million tonnes. • R4,325,000 (A$936,800) of Nimag debt and US$151,800 (A$208,000) of MATS debt was repaid during the period under review. Discussion of the Results NiMag Group of Companies ("Nimag")(GVM - 74% with option to acquire balance by share issue) The overall results of Nimag were pleasing despite the continued strengtheningof the Rand during the period under review. Nickel Magnesium alloy sales remainvery strong and are the core income generator for the group. The smaller FeSiMag and Fibres performed below budget as a result of the strong Rand, thoughboth business units recovered towards the end of the six month period and areexpected to report profits during the latter half of the financial year. Nimag traditionally earns about 60% of its annual profits during the second halfof its financial year. Though the continued strong performance of the Rand isless than ideal for the company, it is partly off-set by the high nickel price.Nimag also continues to seek expansion into new markets and the outlook for therest of the year remains positive. In summary, continued earnings growth throughto the end of the financial year is anticipated. SA Mineral Resources Corporation Limited ("SAMROC") The company was severely affected by the absence of orders from its majorcustomer during the first six months of the year. The company commencedoperating at normal levels during January 2006 and is expected to be cash flowpositive during the remainder of the year. GVM recently announced its intention to dispose of the Samroc investment. It isanticipated that the disposal will realise approximately A$750,000. Accordingly,the investment in Samroc has been reclassified as a Non-Current Asset Held forSale in the balance sheet. Under applicable accounting standards, GVM will nolonger recognize its share of SAMROC's trading results from 1 January 2006. Holfontein Coal Project - GVM 49% The project is estimated to contain an indicated resource of 56 million tonnesfollowing a scoping study. The study was based on mining of 140,000 tonnes per month yielding 870,000tonnes of steaming coal and 420,000 tonnes of coking coal per annum. At currentprices this equates to annual revenue of R200 million. GVM's share of the NPV isestimated at $19million using a 10% discount rate and its share of the annualafter tax cash flow is $3million, once full production is reached. The bankable feasibility study will commence once the "new mining titles" areissued. This is expected during the first quarter of 2006. Exploration Activities No exploration activities were undertaken on the Company's limited properties. Financial review The Nimag Group's financial results were in line with the results achievedduring the comparative 2004 period and the operations, except for Samroc,performed in line with budget. The difference between the 2004 and 2005 halfyear results are mainly due to: • $215,000 once-off listing expenses in relation to the AIM listing;• $366,328 profit on the sale of GMA shares during 2004 compared to a loss of $67,992 during the December 2005 half year. GVM has now completed its divestment from GMA; and• The share of the Samroc loss of $98,630. The Rand as at 31 December 2005 was 9.4% stronger against the A$ compared to 30June 2005, resulting in a significant increase in the A$ equivalent of theNimag loans at the balance sheet date. However, R4,325,000 (A$936,800) of Nimagdebt and US$151,800 (A$208,000) of MATS debt was repaid during the period underreview. The December 2004 profit excluding the profit on the sale of the GMA shares(i.e. profit from normal operations) comprised 33% of the 2005 annual profit.This is mainly due to the fact that Nimag earns between 60 and 65% of its profits in the latter half of its financial years. The 2006 forecast is in linewith this tendency and strong profits are expected during the latter half ofthe financial year. The Rand has increased on average by 5% against the Australian Dollar during the first two months. The strong performance of theRand against the Australian Dollar could further underpin the Nimag profitsduring the second half of the year. Adoption of Australian Equivalents to IFRS This interim financial report has been prepared under Australian equivalents toIFRS. A reconciliation of differences between previous GAAP and Australianequivalents to IFRS has been included in Note 2 of this report. EVENTS SUBSEQUENT TO REPORTING DATE No material events took place between the reporting date and the date of thisreport. AUDITOR'S INDEPENDENCE DECLARATION A copy of the auditor's independence declaration as required under Section 307Cof the Corporations Act 2001 is set out on page 25. Dated at Perth, Western Australia, this 28th day of February 2006. Signed in accordance with a resolution of the directors: ________________________________ S.J. FarrellDirector CONSOLIDATED INCOME STATEMENT Consolidated ConsolidatedFOR THE HALF-YEAR ENDED 31 DECEMBER 2005 Note 31.12.2005 31.12.2004 $ (IFRS restated) $Sale of goods 15,137,300 15,532,256Gain/(Loss) from disposal of investments (67,992) 366,328Other 176,737 225,293Total revenue 15,246,045 16,123,877 Changes in inventory of finished goods (947,957) (571,136)Raw materials and consumables used (10,623,356) (11,372,530)Consulting, accounting & professional (217,469) (251,056)expensesEmployee expenses (1,438,889) (1,470,353)Depreciation and amortisation expenses (126,441) (161,167)Diminution in investments (1,081) (273,768)Bad debt expense (1,159) -Exploration expense - (1,598)Office rent and outgoings (75,326) (37,768)Borrowing costs (346,902) (478,899)Other expenses from ordinary activities (1,377,445) (727,667)Share of net profit/(losses) of associateaccounted for using the equity method (98,630) 176(Loss)/Profit from continuing operations (8,610) 778,111before income tax Income tax expense (132,837) (223,692) (Loss)/Profit from continuing operationsafter related income tax expense (141,447) 554,419 Outside equity interest (124,690) (124,203) Net (loss)/profit attributable to members (266,137) 430,216of the parent entity Basic (loss)/profit per share for GVM (0.96 cents) 1.64 centsMetals Limited There are no dilutive potential ordinaryshares therefore diluted profit per sharehas not been calculated or disclosed. TheGVM shares were consolidated in the ratio10:1 during the period under review and thecomparative earnings per share is restatedaccordingly. The accompanying notes form part of these financial statements. Consolidated ConsolidatedCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2005 Note 31 December 2005 30 June 2005 $ (IFRS re-stated) $CURRENT ASSETS Cash assets 1,333,937 1,806,353Receivables 3,942,083 4,216,583Inventory 2,709,101 3,363,679Other financial assets 885,446 1,498,009 Total Current Assets 8,870,567 10,884,624 NON CURRENT ASSETS Assets held for sale (Investment in 3 124,176 222,806an associate)Intangibles 9,206,288 9,206,288Other financial assets 711,556 925,645Property, plant and equipment 2,407,471 2,434,245Deferred tax 26,887 26,886 Total Non Current Assets 12,476,378 12,815,870 TOTAL ASSETS 21,346,945 23,700,494 CURRENT LIABILITIES Payables 3,726,408 6,178,289Interest bearing liabilities 3,316,466 2,016,220Provisions (3,110) 99,986Current tax liability 123,909 116,810 Total Current Liabilities 7,163,673 8,411,305 NON CURRENT LIABILITIESPayables 1,367,951 1,580,489Interest bearing liabilities 4,228,738 4,736,731 TOTAL NON CURRENT LIABILITIES 5,596,689 6,317,220 TOTAL LIABILITIES 12,760,362 14,728,525 NET ASSETS 8,586,583 8,971,969 EQUITY Issued Capital 4 34,550,936 34,500,935Reserves 1,030,566 1,244,562Accumulated losses (30,345,782) (30,079,645) TOTAL PARENT EQUITY INTEREST 5,235,719 5,665,852 OUTSIDE EQUITY INTEREST 3,350,864 3,306,117 TOTAL EQUITY 8,586,583 8,971,969 The accompanying notes form part of these financial statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE HALF YEARENDED 31 DECEMBER 2005 $ $ $ $ $ Note Share Capital Foreign Retained Total Capital Profit Translation profits Ordinary Reserves Reserve Balance at 1.7.2004 33,469,250 136,445 599,872 (30,872,984) 3,332,583Profit attributable to 430,216 430,216members of parententity Foreign currency 45,543 45,543translationadjustmentsBalance at 31.12.2004 33,469,250 136,445 645,415 (30,442,768) 3,808,342 Balance at 1.7.2005 34,500,935 136,445 1,108,117 (30,079,645) 5,665,852Shares issued during 50,000 50,000the periodLoss attributable to (266,137) (266,137)members of parententity Foreign currencytranslationadjustments (213,996) (213,996)attributable tomembers of parententityBalance at 31.12.2005 34,550,935 136,445 894,121 (30,345,782) 5,235,719 The accompanying notes form part of these financial statements. CONSOLIDATED CASH FLOW STATEMENT FOR THE Consolidated ConsolidatedHALF-YEAR ENDED 31 DECEMBER 2005 31.12.2005 31.12.2004 $ $Cash Flows used in Operating Activities Cash receipts in the course of operations 15,574,251 15,936,129Interest received 14,287 34,990Cash payments in the course of operations (15,966,308) (14,667,157)Interest paid (346,902) (478,899)Tax paid (125,739) (205,149) Net cash generated by/(used in) operating (850,411) 619,914activities Cash Flows used in Investing Activities Proceeds from sale of equity investments 169,137 939,827Payments for investments (24,121) (2,256,168)Payments for property, plant and equipment (99,668) (39,234) Net cash provided by investing activities 45,348 (1,355,575) Cash Flows from Financing Activities Proceeds from issues of shares and optionsto outside equity interest 50,000 -Proceeds from borrowings - 1,796,183Repayment of borrowings (533,487) (1,134,773) Net cash provided by financing activities (483,487) 661,410 NET INCREASE IN CASH HELD (1,288,550) (74,251) Cash at the beginning of the half-year 1,027,493 767,070 Exchange rate adjustment (297,069) 20,063 Cash at the end of the half-year (558,126) 712,882 The accompanying notes form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2005 NOTE 1 - BASIS OF PREPARATION The half-year consolidated financial statements are a general purpose financialreport prepared in accordance with the requirements of the Corporations Act2001, Accounting Standard AASB 134: Interim Financial Reporting, Urgent IssuesGroup Interpretations and other authoritative pronouncements of the AustralianAccounting Standards Board. It is recommended that this financial report be read in conjunction with theannual financial report for the year ended 30 June 2005 and any publicannouncements made by GVM Metals Limited and its controlled entities during thehalf-year in accordance with continuous disclosure requirements arising underthe Corporations Act 2001. As this is the first interim financial report prepared under Australianequivalents to IFRS, the accounting policies applied are inconsistent with thoseapplied in the 2005 annual report as this report was presented under previousAustralian GAAP. Accordingly, a summary of the significant accounting policiesunder Australian equivalents to IFRS has been included below. A reconciliationof equity and profit and loss between previous GAAP and Australian equivalentsto IFRS has been prepared per Note 2. The half-year report does not include full disclosures of the type normallyincluded in an annual financial report. ACCOUNTING POLICIES (a) Principles of consolidation Controlled entities The financial statements of controlled entities results are included from thedate control commences until the date control ceases. Outside interests in the equity and results of the entities that are controlledby the Company are shown as a separate item in the consolidated financialstatements. Associates Associates are those entities, other than partnerships, over which theconsolidated entity exercises significant influence and which are not intendedfor sale in the near future. In the consolidated financial statements, investments in associates areaccounted for using equity accounting principles. Investments in associates arecarried at the lower of the equity accounted amount and recoverable amount. Theconsolidated entity's equity accounted share of the associates' net profit orloss is recognised in the consolidated income statement from the date thesignificant influence commences until the date the significant influence ceases.Other movements in reserves are recognised directly in the consolidatedreserves. Transactions eliminated on consolidation The balances and effects of transactions, between controlled entities includedin the consolidated financial statements have been eliminated. (b) Revenue recognition Revenues are recognised at fair value of the consideration received net of theamount of goods and services tax ("GST"). Exchanges of goods or services of thesame nature and value without any cash consideration are not recognised asrevenues. Sale of goods Revenue from the sale of nickel magnesium alloys (NiMag), ferro-nickel magnesiumalloys (FeNiMag), ferro-silicon magnesium alloys (FeSiMag) and other masteralloys are recognised when control of the goods passes to the customer. Forlocal sales this is usually when the customer receives the goods. For exportsales it is determined based on individual sales agreements however controlusually passes when the goods are received by the shipping agent and the bill oflading is sighted by the customer. Interest revenue Interest revenue is recognised as it accrues, taking into account the effectiveyield of the financial asset. Sale of non-current assets The gain or loss on disposal is calculated as the difference between thecarrying amount of the asset at the time of disposal and the net proceeds ondisposal. (c) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods andservices tax (GST), except where the amount of GST incurred is not recoverablefrom the Australian Tax Office (ATO). In these circumstances the GST isrecognised as part of the cost of acquisition of the asset or as part of theitem of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as acurrent asset or liability in the balance sheet. Cashflows are included in the statement of cash flows on a gross basis. The GSTcomponents of cashflows arising from investing and financing activities whichare recoverable from, or payable to, the ATO are classified as operatingcashflows. (d) Cash assets For the purposes of the Statement of Cashflows, cash includes deposits which arereadily convertible to cash on hand and which are used in the cash managementfunction on a day-to-day basis, net of outstanding bank overdrafts. (e) Acquisition of Assets All assets acquired including property, plant and equipment and intangiblesother than goodwill are initially recorded at their cost of acquisition at thedate of the acquisition, being the fair value of the consideration provided plusincidental costs directly attributable to the acquisition. When equityinstruments are issued as consideration, their market price at the date of theacquisition is used as fair value except where the notional price at which theycould be placed in the market is a better indication of fair value. (f) Property, Plant & Equipment Each class of property, plant and equipment is carried at cost less, whereapplicable, any accumulated depreciation and impairment losses. Property Freehold land and buildings are measured on the cost basis, less subsequentdepreciation (for buildings) and impairment losses. Plant and Equipment Plant and equipment are measured on the cost basis less depreciation andimpairment losses. The carrying amount of plant and equipment is reviewedannually by directors to ensure it is not in excess of the recoverable amountfrom theses assets. The recoverable amount is assessed on the basis of theexpected net cash flows that will be received from the assets' employment andsubsequent disposal. The expected net cash flows have been discounted to theirpresent values in determining recoverable amounts. The costs of fixed assets constructed within the economic entity include thecost of materials, direct labour, borrowing costs and an appropriate proportionof fixed and variable costs. Subsequent costs are included in the asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that future economicbenefits associated with the item will flow to the group and the cost of theitem can be measured reliably. All other repairs and maintenance are charged tothe income statement during the financial period in which they are incurred. (g) Depreciation and Amortisation The depreciable amount of all fixed assets including buildings and capitalisedleased assets, but excluding freehold land, is depreciated on a straight lineand reducing balance methods over their estimated useful lives to the economicentity commencing from the time the asset is held ready for use. Leaseholdimprovements are depreciated over the shorter of either the unexpired period ofthe lease or the estimated useful lives of the improvements. The depreciation and amortisation rates used for each class of assets are asfollows: Range - 2005 Range - 2004 • Furniture, fittings and office equipment 13% - 50% 13% - 33% • Motor vehicles 20% - 33% 20% - 33% • Plant & equipment 20% 20% • Leasehold Improvements 25% 20% • Buildings 20% 20% The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. An asset's carrying amount is writtendown immediately to its recoverable amount if the asset's carrying amount isgreater than its estimated recoverable amount. Gains and losses on disposals aredetermined by comparing proceeds with the carrying amount. These gains andlosses are included in the income statement. (h) Impairment of Assets At each reporting date, the group reviews the carrying values of its tangibleand intangible assets to determine whether there is any indication that thoseassets have been impaired. If such an indication exists, the recoverable amountof the asset, being the higher of the asset's fair value less costs to sell andvalue in use, is compared to the asset's carrying value. Any excess of theasset's carrying value over its recoverable amount is expensed in the incomestatement. Impairment testing is performed annually for goodwill and intangible assets withindefinite lives. Where it is not possible to estimate the recoverable amount of an individualasset, the group estimates the recoverable amount of the cash-generating unit towhich the asset belongs. (i) Income tax The charge for current income tax expense is based on the profit for the yearadjusted for any non-assessable or disallowed items. It is calculated using thetax rates that have been enacted or are substantially enacted by the balancedate. Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the financial statements. No deferredtax will be recognised from the initial recognition of an asset or liability,excluding a business combination, where there is no effect on accounting ortaxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to theperiod when the asset is realised or liability is settled. Deferred tax iscredited in the income statement except where it relates to items that may becredited directly to equity, in which case the deferred tax is adjusted againstequity. Deferred income tax assets are recognised to the extent that it is probable thatfuture tax profits will be available against which deductible temporarydifferences can be utilised. The amount of benefits brought to account or which may be realised in the futureis based on the assumption that no adverse change will occur in income taxlegislation and the anticipation that the economic entity will derive sufficientfuture assessable income to enable the benefit to be realised and comply withthe conditions of deductibility imposed by the law. During the 2002/03 financial year, legislation was enacted to allow groups,comprising of a parent entity and its Australian resident wholly owned entities,to elect to consolidate and be treated as a single entity for income taxpurposes. The legislation, which includes both elective and mandatory elements,is applicable to the Consolidated Entity. As at 31 December 2005, the directorsof the Company have not made a decision to elect to be taxed as a single entity.The financial effect of the legislation has not been brought to account in thefinancial statements for the half year 31 December 2005. (j) Leases Operating leases Lease payment for the operating leases, where substantially all the risks andbenefits remain with the lessor are charged as expenses in the period in whichthey are incurred. (k) Exploration and evaluation expenditure Exploration, evaluation and development expenditure incurred is accumulated inrespect of each identifiable area of interest. These costs are only carriedforward to the extent that they are expected to be recouped through thesuccessful development of the area or where activities in the area have not yetreached a stage that permits reasonable assessment of the existence ofeconomically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in fullagainst profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area ofinterest are amortised over the life of the area according to the rate ofdepletion of the economically recoverable reserves. A regular review isundertaken of each area of interest to determine the appropriateness ofcontinuing to carry forward costs in relation to that area of interest. (l) Employee Benefits Provision is made for the company's liability for employee benefits arising fromservices rendered by employees to balance date. Employee benefits that areexpected to be settled within one year have been measured at the amountsexpected to be paid when the liability is settled, plus related on-costs.Employee benefits payable later than one year have been measured at the presentvalue of the estimated future cash outflows to be made for those benefits. (m) Receivables Amounts receivable from third parties are carried at amounts due. Therecoverability of the debts is assessed at balance date and specific provisionis made for any doubtful accounts. (n) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the group's entities is measured using thecurrency of the primary economic environment in which that entity operates. Theconsolidated financial statements are presented in Australian dollars which isthe parent entity's functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using theexchange rates prevailing at the date of the transaction. Foreign currencymonetary items are translated at the year-end exchange rate. Non-monetary itemsmeasured at historical cost continue to be carried at the exchange rate at thedate of the transaction. Non-monetary items measured at fair value are reportedat the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognisedin the income statement, except where deferred in equity as a qualifying cashflow or net investment hedge. Exchange difference arising on the translation of non-monetary items arerecognised directly in equity to the extent that the gain or loss is directlyrecognised in equity, otherwise the exchange difference is recognised in theincome statement. Group companies The financial results and position of foreign operations whose functionalcurrency is different from the group's presentation currency are translated asfollows: Assets and liabilities are translated at year-end exchange rates prevailing atthat reporting date. Income and expenses are translated at average exchange rates for the period. Retained profits are translated at the exchange rates prevailing at the date ofthe transaction. Exchange differences arising on translation of foreign operations aretransferred directly to the group's foreign currency translation reserve in thebalance sheet. These differences are recognised in the income statement in theperiod in which the operation is disposed. (o) Inventories Inventories are measured at the lower of cost and net realisable value. The costof manufactured products includes direct materials, direct labour and anappropriate portion of variable and fixed overheads. Overheads are applied onthe basis of normal operating capacity. Costs are assigned on the basis ofweighted average costs. (p) Financial Instruments Recognition Financial instruments are initially measured at cost on trade date, whichinclude transaction costs, when the related contractual rights and obligationsexist. Subsequent to initial recognition, these instruments are measured as setout below. Financial assets at fair value through profit and loss A financial asset is classified in this category if acquired principally for thepurpose of selling in the short term or if so designated by management andwithin the requirements of AASB 139: Financial Instruments - Recognition andMeasurement. Derivatives are also categorised as held for trading hedges.Realised and unrealised gains and losses arising from changes in the fair valueof these assets are included in the income statement in the period in which theyarise. Loans and receivables Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market and are stated atamortised cost using the effective interest rate method. Held-to-maturity investments These investments have fixed maturities, and it is the group's intention to holdthese investments to maturity. Any held-to-maturity investments held by thegroup are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets Available-for-sale financial assets include any financial assets not included inthe above categories. Available-for-sale financial assets are reflected at fairvalue. Unrealised gains or losses arising from changes in fair value are takendirectly to equity. Financial Liabilities Non-derivative financial liabilities are recognised at amortised cost,comprising original debt less principal payments and amortisation. Derivative Instruments Derivative instruments are measured at fair value. Gains and losses arising fromchanges in fair value are taken to income statement unless they are designatedas hedges. Fair Value Fair value is determined based on current bid prices for all quoted investments.Valuation techniques are applied to determine the fair value for all unlistedsecurities, including recent arms length transaction, reference to similarinstruments and option pricing models. Impairment At each reporting date, the group assess whether there is objective evidencethat a financial instrument has been impaired. In the case of available-for-salefinancial instruments, a prolonged decline in value of the instrument isconsidered to determine whether impairment has arisen. Impairment losses arerecognised in the income statement. (q) Goodwill Goodwill and goodwill on consolidation are initially recorded at the amount bywhich the purchase price for a business or for an ownership interest in acontrolled entity exceeds the fair value attributed to its net assets at date ofacquisition. Goodwill on acquisitions of subsidiaries is included in intangibleassets. Goodwill on acquisition of associates is included in investments inassociates. Goodwill is tested annually for impairment and carried at cost lessaccumulated impairment losses. Gains and losses on the disposal of an entityinclude the carrying amount of goodwill relating to the entity sold. (r) Investments in Associates Investment in an associate company is capitalised in the financial statements byapplying the equity method of accounting where significant influence isexercised over the investee. Significant influence exists where the investor hasthe power to participate in the financial and operating policy decisions of theinvestee but does not have control or joint control over those policies. GVM recently announced its intention to dispose of its associate, Samroc. It isanticipated that the disposal will realise approximately A$750,000. Underapplicable Accounting Standards, the investment in Samroc has been reclassifiedas a Non-Current Asset Held for Sale in the balance sheet and is measured at thelower of its carrying amount and fair value less costs to sell. The carryingvalue of the Samroc investment at balance date has been reduced by GVM's shareof Samroc's trading loss for the half year. As the Samroc investment is nowclassified as a Non-Current Asset Held for Sale, GVM will no longer recognizeany future share of Samroc's trading results from 1 January 2006. (s) Accounts payable Liabilities are recognised for amounts to be paid in the future for goods orservices received, whether or not billed to the Company or consolidated entity.Trade accounts payable are normally settled within 45 days. (t) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction orproduction of assets that necessarily take a substantial period of time toprepare for their intended use or sale, are added to the cost of those assets,until such time as the assets are substantially ready for their intended use orsale. All other borrowing costs are recognised in income in the period in which theyare incurred. (u) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted toconform to changes in presentation for the current financial period. NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIALREPORTING STANDARDS Note Previous Adjustments Australian GAAP at on equivalents 31.12.2004 introduction to IFRS at of 31.12.2004Reconciliation of Equity at 31 AustralianDecember 2004 equivalents to IFRS $ $ $ CURRENT ASSETS Cash assets 712,822 - 712,822Receivables 3,073,572 - 3,073,572Inventory 2,132,725 - 2,132,725 Total Current Assets 5,919,119 - 5,919,119 NON CURRENT ASSETS Investment accounted for using 257,301 - 257,301the equity methodIntangibles 2a 8,934,461 271,827 9,206,288Other financial assets 455,652 - 455,652Property, plant and equipment 2,469,987 - 2,469,987 Total Non Current Assets 12,117,401 271,827 12,389,228 (a) TOTAL ASSETS 18,036,520 271,827 18,308,347 CURRENT LIABILITIES Payables 1,978,909 - 1,978,909Interest bearing liabilities 1,548,719 - 1,548,719Provisions 51,127 - 51,127Current tax liability 254,885 - 254,885 Total Current Liabilities 3,833,640 - 3,833,640 NON CURRENT LIABILITIESPayables 1,662,763 - 1,662,763Interest bearing liabilities 6,122,477 - 6,122,477Deferred tax liability 50,093 - 50,093 TOTAL NON CURRENT LIABILITIES 7,835,333 - 7,835,333 TOTAL LIABILITIES 11,668,973 - 11,668,973 NET ASSETS 6,367,547 271,827 6,639,374 EQUITYIssued Capital 33,469,250 - 33,469,250Reserves 781,860 - 781,860Accumulated losses 2 a (30,665,588) 222,820 (30,442,768) TOTAL PARENT EQUITY INTEREST 3,585,522 222,820 3,808,342 OUTSIDE EQUITY INTEREST 2 a 2,782,025 49,007 2,831,032TOTAL EQUITY 6,367,547 271,827 6,639,374 NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIALREPORTING STANDARDS (cont'd) Note Previous Adjustments Australian GAAP at on equivalents 30.6.2005 introduction to IFRS at of 30.6.2005Reconciliation of Equity at 30 AustralianJune 2005 equivalents to IFRS $ $ $ CURRENT ASSETS Cash assets 1,806,353 - 1,806,353Receivables 4,216,583 - 4,216,583Inventory 3,363,679 - 3,363,679Other financial assets 2b 1,498,009 1,498,009 Total Current Assets 9,386,615 1,498,009 10,884,624 NON CURRENT ASSETS Investment accounted for using -the equity method 222,806 222,806Intangibles 2 a 8,736,300 469,988 9,206,288Other financial assets 925,645 - 925,645Property, plant and equipment 2,434,245 - 2,434,245Deferred tax 26,886 26,886Total Non Current Assets 12,345,882 469,988 12,815,870 (b) TOTAL ASSETS 21,732,497 1967,997 23,700,494 CURRENT LIABILITIES Payables 2b 4,680,280 1,498,009 6,178,289Interest bearing liabilities 2,016,220 - 2,016,220Provisions 99,986 - 99,986Current tax liability 116,810 - 116,810 Total Current Liabilities 6,913,296 1,498,009 8,411,305 NON CURRENT LIABILITIESPayables 1,580,489 -Interest bearing liabilities 4,736,731 - 1,580,489 - 4,736,731 TOTAL NON CURRENT LIABILITIES 6,317,220 - 6,317,220 TOTAL LIABILITIES 13,230,516 1,498,009 14,728,525 NET ASSETS 8,501,981 469,988 8,971,969 EQUITYIssued Capital 34,500,935 - 34,500,935Reserves 1,244,562 - 1,244,562Accumulated losses 2 a (30,449,104) 369,459 (30,079,645) TOTAL PARENT EQUITY INTEREST 5,296,393 184,729 5,665,852 OUTSIDE EQUITY INTEREST 2 a 3,205,588 100,529 3,306,117 TOTAL EQUITY 8,501,981 469,988 8,971,969 NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIALREPORTING STANDARDS (cont'd) Note Previous GAAP Effect of Australian transition equivalents to to IFRS AustralianReconciliation of Profit for equivalentsthe half-year 31 December 2004 to IFRS $ $ $ Revenue 2c 16,607,029 (483,152) 16,123,877 Changes in inventory of (571,136) (571,136)finished goodsRaw materials and consumables (11,372,530) (11,372,530)usedConsulting, accounting & (251,056) (251,056)professional expensesEmployee expenses (1,470,353) (1,470,353)Depreciation and amortisation 2 a (432,994) 271,827 (161,167)expensesDiminution in investments (273,768) (273,768)Carrying value of GMA Resources 2c (483,152) 483,152 -Plc investment disposed ofExploration expense (1,598) (1,598)Office rent and outgoings (37,768) (37,768)Borrowing costs (478,899) (478,899)Other expenses from ordinary (727,667) (727,667)activitiesShare of net profit/(losses) ofassociate accounted for usingthe equity method 176 176(Loss)/Profit from continuingoperations before income tax 506,284 271,827 778,111 Income tax expense (223,692) (223,692) Profit from continuingoperations after related incometax expense 282,592 271,827 554,419 Outside equity interest (75,196) (49,007) (124,203) Net profit attributable tomembers of the parent entity 207,396 222,820 430,216 NOTE 2: FIRST-TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIALREPORTING STANDARDS (cont'd) Note Previous Effect of Australian GAAP transition equivalents to to IFRS AustralianReconciliation of Profit for the equivalentsfull year 30 June 2005 to IFRS $ $ $ REVENUE 2c 31,520,378 (519,849) 31,000,529 Changes in inventories of finishedgoods and work in progress 66,834 66,834Raw materials and consumables used (22,480,207) (22,480,207)Consulting expenses (413,652) (413,652)Employee expenses (2,865,537) (2,865,537)Borrowing costs (904,206) (904,206)Depreciation expenses (366,226) (366,226)Amortisation of goodwill 2 a (469,988) 469,988 -Office rental , outgoings and (324,941) (324,941)parkingDecrease/(increase) diminution in (442,265) (442,265)value of investmentsCarrying value of investments 2c (483,152) 483,152 -disposed ofCarrying value of property, plantand equipment disposed of 2c (36,697) 36,697 -Provision for non-recoverability of (137,866) (137,866)loansOther expenses from ordinary (1,651,559) (1,651,559)activitiesShare of net profit/(losses) ofassociate accounted for using theequity method 23,230 23,230Profit from continuing operationsbefore income tax (expense)/benefit 1,034,147 469,988 1,504,135 Income tax expense (323,535) - (323,535)Profit from continuing operations 710,612 469,988 1,180,600after related income tax (expense)/benefit Outside equity interest 2 a (286,733) (100,529) (387,262) Net profit attributable to members 2 a 423,879 369,459 793,338of the parent entity 2 a) Under AASB 3: Business Combinations, goodwill is no longer amortised butsubject to annual impairment testing. All goodwill amortised under previous GAAPfrom 1 July 2004 has been reversed. Goodwill amounting to $469,988 previouslyamortised in the 2005 full financial year has been reversed in the incomestatement for the year ended 30 June 2005. Goodwill amounting to $271,827previously amortised for the 2004 half year has been reversed in the incomestatement for the half year ended 31 December 2004. 2 b) Under AASB 139: Financial Instruments-Recognition and Measurement,derivative financial instruments are measured at fair value at reporting date.Gains and losses resulting from changes to fair value are taken to the incomestatement unless they are designated as hedges, in which case the difference istaken directly to equity. The group held a number of forward exchange contractsat 30 June 2005 (31 December 2004: Nil). These forward exchange contracts havebeen recorded in the 30 June 2005 balance sheet as "Other Financial Assets" andreflected at fair value. A corresponding increase in current payables has alsobeen recognised in the balance sheet at 30 June 2005. Under the previousaccounting policy, these forward exchange contracts were not recorded on thebalance sheet. The effect of this change in accounting policy has been toincrease total assets and liabilities at 30 June 2005 by $1,498,009 with noeffect on net assets. 2 c) Under AIFRS, revenue from the sale of non-current assets must be reflectedas the gain or loss on sale rather than the proceeds from sale of those assets.This reclassification has been adjusted in both the 30 June 2005 and 31 December2004 Income Statements. The effect of this change in accounting policy was toreduce reported revenue from outside operating activities in 30.6.2005 and31.12.2004 by $519,849 and $483,152 respectively. There is however, no effect onthe net results for both years as this is purely a reclassification adjustmentwithin the Income Statement. 2 d) The reconciliation of equity as at 1 July 2004 has not been disclosed onthe basis that there are no material differences between the financialstatements presented under previous Australian GAAP and Australian equivalentsto IFRS. Consolidated Consolidated 31 Dec 2005 30 June 20053. MOVEMENTS IN ASSETS HELD FOR SALE (PREVIOUSLY $ $INVESTMENTS EQUITY ACCOUNTED) Carrying amount of investments in associates at 222,806 525,270beginning of half-year Share of associate's net profit/(loss) for the (98,630) 23,230half year / full year Diminution in investment - (325,694) Foreign currency translation adjustment - - Carrying amount of investments in associates at 124,176 222,806end of half-year GVM Metals owns a 30.19% interest in SA Mineral Resources Corporation Limited("Samroc"), a company listed on the Johannesburg Stock Exchange. Up till 31December 2005, the investment was accounted for on the equity method. GVM Metalsannounced its intention to dispose of the investment during the period underreview. In accordance with applicable Accounting Standards, the investment must,therefore, be classified as an Asset Held for Sale and be measured at the lowerof its carrying amount and fair value less cost of sale. GVM will no longerrecognize its share of Samroc's trading results from 1 January 2006. On 31 December 2005, the investment traded on the Johannesburg Stock Exchange at0.43cents. Hence, the market value of GVM's investment in Samroc was $489,516. Consolidated 31 Dec 2005 $4. ISSUED CAPITAL Issued and Paid-Up Capital27,698,387 (2005: 274,985,189) fully paid 34,550,936ordinary shares Movements in Issued Capital (number of shares) Opening balance at beginning of the half-year 274,985,18910:1 share consolidation (247,486,802)Revised Opening balance post 10:1 consolidation 27,498,387 Movement during 6 month period under review 200,000 Total equity at the end of the half-year 27,698,387 The GVM shares were consolidated in the ratio 10:1 during the period underreview. The company has entered into an Option Agreement whereby GVM has a call optiongranting GVM the right to acquire the remaining 26% of Nimag, for a totalconsideration of 6.5 million shares in GVM at 40 cents per share. Similarly, theshareholders of the remaining 26% of Nimag have a put option granting them theright to dispose of their holding in Nimag to GVM, for the consideration of 6.5million shares in GVM at 40 cents per share. The Option Agreement is subject tocertain terms and conditions. The issuing of the GVM shares is also subject toshareholder approval. Options The following options to subscribe for ordinary fully paid shares areoutstanding at balance date: Number Issued Number Exercise Expiry Date Quoted Price 750,000 - $0.1923 30 September 2006 56,460,000 quoted options expired during the six months under review. 5. SEGMENT INFORMATION Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated items mainly comprise interest or dividend-earning assets andrevenue, interest bearing loans, borrowings and expenses, and corporate assetsand expenses. Business segmentsThe consolidated entity comprises the following main business segments: Manufacturing Mineral processing by Samroc and Nimag in South AfricaInvesting Equity investments in Australia, Canada and United Kingdom 31 December 2005 Primary reporting industry Manufacturing Investing Consolidated $ $ $RevenueTotal segment revenue 15,280,359 (67,992) 15,212,367Unallocated revenue - - 33,678Total revenue 15,246,045 ResultsSegment results 862,004 (67,992) 794,012Share of loss of equity accounted (98,630) - (98,630)investmentUnallocated items - - (703,992)Net profit (8,610) Depreciation and amortisation 126,441 - 126,441Provision for diminution of - 1,081 1,081investment AssetsSegment assets 17,944,883 22,706 17,967,589Unallocated corporate assets - - 3,255,180Equity accounted investment 124,176 - 124,176Consolidated total assets 21,346,945 LiabilitiesSegment liabilities 10,737,188 - 10,737,188Unallocated liabilities - - 2,023,174Consolidated total liabilities 12,760,362 5. SEGMENT INFORMATION (cont'd) 31 December 2004 Primary reporting industry Manufacturing Investing Consolidated $ $ $RevenueTotal segment revenue 15,532,256 366,328 15,898,584Unallocated revenue - - 225,293Total revenue 16,123,877 ResultsSegment results 887,860 366,328 1,254,188Share of profit of equity accounted 176 - 176investmentUnallocated items - - (476,253)Net profit 778,111 Depreciation 151,764 9,403 161,167Provision for diminution of (273,768) - (273,768)investment AssetsSegment assets 15,336,385 455,652 15,792,037Unallocated corporate assets - - 2,259,009Equity accounted investment 257,301 - 257,301Consolidated total assets 18,308,347 LiabilitiesSegment liabilities 9,916,028 - 9,916,028Unallocated liabilities - - 1,752,945Consolidated total liabilities 11,668,973 6. CONTINGENT LIABILITIES A controlled entity, Nimag (Proprietary) Ltd, is currently involved in a disputewith the South African Revenue Service ("SARS") regarding Value Added Tax("VAT") claimed by SARS. The VAT in dispute is approximately R10m (A$2.2m). Thisis in itself not a contingent liability as any VAT paid is claimed back. SARSmay claim interest of R2m (A$447k) and penalties of R1m (A$223k). Should such aclaim arise Nimag would have a counter claim against its supplier or theirimport agent. Other than that disclosed above, the consolidated entity has no contingentliabilities. 7. EVENTS SUBSEQUENT TO REPORTING DATE There are no matters or events which have arisen since the end of the financialperiod which have significantly affected or may significantly affect theoperations of the consolidated entity, the results of those operations or thestate of affairs of the consolidated entity in subsequent financial years. DIRECTORS DECLARATION The directors of the company declare that: (a) the financial statements and notes set out on pages 5 to 22 (i) comply with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations; and (ii) give a true and fair view of the economic entity's financial position as at 31 December 2005 and of its performance for the half-year ended on that date. (b) in the directors' opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board ofDirectors. ________________________________ S. J. Farrell Director Dated at Perth, Western Australia, this 28th day of February 2006. INDEPENDENT REVIEW REPORT TO THE MEMBERS OF GVM METALS LTD SCOPE The financial report and directors' responsibilityThe financial report comprises the balance sheet, income statement, cash flowstatement, statement of changes in equity, accompanying notes to the financialstatements for the consolidated entity comprising both GVM Metals Ltd (thecompany) and the entities it controlled during the half year, and the directors'declaration, for the company, for the half year ended 31 December 2005. 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 theconsolidated entity, and that complies with Accounting Standard AASB 134"Interim Financial Reporting", in accordance with the Corporations Act 2001.This includes responsibility for the maintenance of adequate accounting recordsand internal controls that are designed to prevent and detect fraud and error,and for the accounting policies and accounting estimates inherent in thefinancial report. Review approach We conducted an independent review of the financial report in order to make astatement about it to the members of the company, and in order for the companyto lodge the financial report with the ASX and the Australian Securities andInvestments Commission. Our review was conducted in accordance with Australian Auditing Standardsapplicable to review engagements, in order to state whether, on the basis of theprocedures described, anything has come to our attention that would indicatethat the financial report is not presented fairly in accordance with theCorporations Act 2001, Accounting Standard AASB 134 "Interim FinancialReporting" and other mandatory professional reporting requirements in Australiaso as to present a view which is consistent with our understanding of theconsolidated entity's financial position, and of its performance as representedby the results of its operations and cash flows. We formed our statement on the basis of the review procedures performed, whichincluded: - inquiries of Company personnel, and - analytical procedures applied to financial data. A review is limited primarily to inquiries of Company personnel and analyticalprocedures applied to the financial data. These procedures do not provide allthe evidence that would be required in an audit, thus the level of assurance isless than given in an audit. We have not performed an audit and, accordingly, wedo not express an audit opinion. While we considered the effectiveness of management's internal controls overfinancial reporting when determining the nature and extent of our procedures,our review was not designed to provide assurance on internal controls. Ourreview did not involve an analysis of the prudence of business decisions made bydirectors or management. Independence We are independent of the company, and have met the independence requirements ofAustralian professional ethical pronouncements and the Corporations Act 2001. Wehave given to the directors of the company a written Auditor's IndependenceDeclaration. Statement Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the financial report, as defined in the scopesection, of the consolidated entity GVM Metals Ltd and the entities itcontrolled during the for the half year ended 31 December 2005 is not inaccordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of the consolidated entity at 31 December 2005 and of its performance for the half year ended on that date; and (ii)complying with Accounting Standard AASB 134 "Interim Financial Reporting" and the Corporations Regulations 2001; and (b) other mandatory financial reporting requirements in Australia. NEIL PACE MOORE STEPHENSPARTNER CHARTERED ACCOUNTANTS Signed at Perth this 28th day of February 2006. 24 AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307c OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF GVM METALS LIMITED I declare that, to the best of my knowledge and belief, during the half-yearended 31 December 2005 there have been: (a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review, and (b) no contraventions of any applicable code of professional conduct in relation to the review. NEIL PACE MOORE STEPHENSPARTNER CHARTERED ACCOUNTANTS Signed at Perth this 28th day of February 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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