16th Mar 2006 16:17
Dwyka Diamonds Limited16 March 2006 Dwyka Diamonds Limited ("Dwyka" or "the Company") Half-Yearly Report to 31 December 2005 Review and Results of Operations Highlights • De Beers Tailings Retreatment Project in construction • Two diamondiferous kimberlites secured in Tanzania in second deal with De Beers • Diamond processing recommenced at Newlands and Blaauwbosch, with first sale of diamonds from Newlands sold in October 2005 • Sale of 18.11 carat stone for US$130,000 (US$7,100 per carat) from the Nooitgedacht Alluvial Mine • 42 carat Nooitgedacht stone sold for US$301,018 (US$7,167 per carat) • Rough diamond stock on hand 2201 carats • Indian field exploration continuing with stream sediment sampling in the state of Orissa and Andhra Pradesh • Appointment of Chief Executive Officer African Operations De Beers Diamond Tailings Retreatment Project At the end of the half year, the status of the project was as follows: • Debt finance of ZAR17.2 million was being negotiated • Construction of project was scheduled to be completed first half 2006 • Enhancements to the plant design had been included in construction to increase feed capacity and enhance recoveries • Plant to treat minimum of 50,000 tonnes per month from De Beers Kimberly operations The plant has been designed for feed rates of over 80,000 tonnes per month andfurther increases in capacity should be possible at relatively low cost. DeBeers have indicated that additional feed, above the agreed 50,000 tonnes permonth, will be available subject to satisfactory plant performance. Suchincreased throughput could substantially boost project economics. Dwyka and its black economic empowerment ("BEE") partner Kolong Investments Holdings ("Kolong"), have an agreement with De Beers Consolidated Mines ("De Beers") to re-treat diamond tailings from its Kimberley mines in South Africa. Under the agreement De Beers will supply agreed monthly tonnages for processing at contracted diamond feed grades and market diamond prices. The initial production throughput contracted with De Beers is 50,000 tonnes per month. The tailings project is a joint venture between Dwyka's wholly owned subsidiarySupermix Mining (Pty) Ltd ("Supermix"), and Kolong Investment Holdings (Pty) Ltd("Kolong"). Kolong is a BEE entity. Dwyka has an effective 40% interest in thejoint venture vehicle, Superkolong (Pty) Limited. Mahene and Itanana Kimberlites, Tanzania (JV with De Beers) On the 27th October 2005 the company announced that it had secured a second joint venture with De Beers. The joint venture includes the diamondiferous Mahene and Itanana kimberlite pipes in the Nzega District of Tanzania. Under the terms of the transaction Dwyka will bulk sample the pipes at a cost ofabout US$1.5m. Dwyka's Tanzanian partner, Thorntree Minerals Limited isassisting with logistical, managerial and government liaison support withinTanzania. Thorntree Minerals has the right to participate in 20 per cent ofDwyka's equity interest in the projects once the decision to progress tofeasibility study is taken. Thorntree will be required to fund their share ofcosts to maintain their equity position. De Beers has the option to acquire a 51 per cent shareholding in Dwyka TanzaniaLimited, the Dwyka subsidiary holding the project, by reimbursing Dwyka threetimes the costs incurred by the Company to evaluate the projects. Alternatively,De Beers may elect to remain as a 5 per cent shareholder in Dwyka TanzaniaLimited or convert its shareholding into a 1.5 per cent gross royalty payable ondiamond revenues. As part of the agreement Dwyka Tanzania will sell all diamondsrecovered in the licence areas to De Beers. Newlands Treatment of ore recommenced at the Newlands Diamond Mine on the 21st September2005. Whilst the plant was off-line, a total of 7,000 tonnes of underground orewas stockpiled which the plant will treat during the ramp up of miningoperations. In October 2005 the first parcel of diamonds from tailings processed at NewlandsDiamond Mine was sold to Diamdel, De Beers' rough diamond trading subsidiary.The parcel of 347 carats of predominantly white diamonds achieved a price ofUS$95 per carat for a total sale value of US$ 32,930. The value per carat is inline with the Company's expectations for the Newlands Mine. During the December 05 quarter 6,603 tonnes of kimberlite were treatedrecovering 1,627 carats at an average grade of 24.64 cpht. Blaauwbosch The refurbished plant recommenced operations on 10 October 2005, on a feed oftailings material. Development on the main haulage shaft and second egress has progressed well. Atthe end of the half year, sinking had advanced to a depth of 50 metres. Theshaft has been concrete lined to a depth of 46 metres. The depth of the mainshaft at the end of the half year was 222 metres. A station has been developedat the 205 metre level. Production from underground will commence in the June quarter 2006 ramping up tofull production later in the year. The production target is approximately 3,500carats per month with a value of approximately US$3m per annum. At the end of the half year tailings retreatment was expanded from a singleshift operation to two shifts to improve diamond output prior to theavailability of underground ore. From the recommencement of operations to theend of the half year, 6,541 tonnes of tailings were treated recovering 609carats at an average grade of 9.30 cpht. Nooitgedacht Alluvial Mine During the half year 54,957 tonnes of gravel were treated recovering 773 caratsat an average grade of 1.2 cpht for the September 05 quarter and 1.05 cpht forthe December 05 quarter. A number of large stones were recovered includingstones of the following sizes: 3.11, 3.13, 3.35, 3.61, 4.10, 4.25, 4.32, 4.54,4.60, 4.83, 5.72, 10.96 and 18.89 carats. In July 2005 the Company sold an 18.11 carat for US$7,100 per carat. In October 2005 the Company sold a 42 carat stone for US$7,167 per carat, a 17carat stone for US$2,105 per carat and an 11 carat stone for US$1,616.00 percarat. Additional run-of-mine production of 468 carats achieved a sale price ofUS$132,805 (US$285 per carat). Diamonds on hand from Nooitgedacht at period end totalled 243.2 carats. New Elands The New Elands mine will be brought into production once Blaauwbosch andNewlands are operating at target levels. Bosele Exploration To assess the potential of the Bosele system to contain diamonds, two bulksamples were extracted and processed. Over forty diamonds were recovered. TheCompany is planning further bulk sampling to determine the benefits ofindependently continuing exploration or attracting a partner to assist in theassessment. A number of targets with similar superficial expressions to the Boselevolcanoclastic body have been identified in the surrounding areas using aerialphotography and satellite imagery. Prospecting right applications have beensubmitted over the identified target areas. Industrial Division The Industrial division continues to perform to expectations with combinedconcrete, brick and paver sales for the December half being R15m compared withR14.5m for the same period last year. Trading conditions were generally tighterduring the second half of 2005 but have become more buoyant in 2006 and theDivision is expecting to increase volumes in the current six month period. Indian Diamond Exploration Programme Exploration activity increased during the period. Field activity concentrated onstream sediment sampling to detect the presence of indictor minerals. 262samples were collected; three in Andhra Pradesh, 180 in Uttar Pradesh and 79 inOrissa. These samples were all sent to Diatech laboratories in Perth, WesternAustralia for treatment and observation for diamond and kimberlitic indicatorminerals. Preliminary results from Diatech have shown that there are six positive samplescontaining kimberlitic indicator minerals. The indicator minerals observedinclude chrome diopside, pyrope garnet and chrome spinel. The positive sampleshave been sent for microprobe analysis to assess their chemistries; analysis ofthe results is ongoing. Since the end of the reporting period sampling has continued on a regular basis.The project now has three sampling teams which will be operating in the field ona campaign style basis collecting reconnaissance and follow up samples untilJune 2006. Directors The names of the Directors of the Company in office during the half-year anduntil the date of this report are: Melissa Sturgess, Adrian Griffin, Cedric Bredenkamp. Michael Langoulant, EdNealon and Evan Kirby. Share Issues Mine Purchase As part of the purchase price for the underground mines acquired during theperiod 2,747,802 fully paid ordinary shares were issued at an issue price of 35pence (A$0.84) per share being the market price on the date of issue. Placement During the half-year, Dwyka issued 4,500,000 fully paid ordinary shares toinstitutional clients of Williams de Broe Plc at a price of 30 pence (A$0.72)per share to raise £1.3 million (A$3.1 million) in working capital and a further749,137 fully paid ordinary shares at a price of A$0.685 per share in lieu ofconsulting services rendered. Employee share plans During the period 750,000 and 3,350,000 shares were issued under the Company'semployee share plans at A$0.87 and A$1.00 per share respectively. These shareissues were funded by non-recourse loans to employees in accordance with theterms of the share plans. Under AIFRS these shares do not get recognised asequity nor do the employee loans get recognised as receivables until such timeas the employee loans are re-paid or the Company sells the underlying shares. Matters Subsequent to the End of the Half-Year No matters or circumstances have arisen since 31 December 2005 that havesignificantly affected, or may significantly affect: a) the consolidated entity's operations in the future financial periods,b) the results of those operations in future financial periods, andc) the consolidated entity's state of affairs in future financial periods. Rounding of Amounts The amounts contained in this Report have been rounded to the nearest $1,000(where rounding is applicable) under the option available to the Company underASIC Class order 98/0100. The Company is an entity to which the class orderapplies. Auditors' Independence Declaration Section 307C of the Corporations Act 2001 requires our auditors,PricewaterhouseCoopers, to provide the Directors of the Company with anIndependence Declaration in relation to the review of the half-year financialreport. This Independence Declaration is set out on the following page. Dated at Perth this 16th day of March 2006. Signed in accordance with a resolution of the Directors. M SturgessExecutive Chairman Auditor's Independence Declaration As lead auditor for the review of Dwyka Diamonds Limited for the half year ended31 December 2005, I declare that to the best of my knowledge and belief, therehave been: a) no contraventions of the auditor independence requirements of 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. This declaration is in respect of Dwyka Diamonds Limited and its controlledentities during the period. David Smith PerthPartner 16 March 2006PricewaterhouseCoopers CONSOLIDATED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2005 Half-year Half-year Ended Ended 31 Dec 2005 31 Dec 2004 $'000s $'000s ----------- ----------- Revenue from sale of goods 3,866 2,366Cost of sales (2,783) (1,920) ----------- -----------Gross profit 1,083 446 Other income 269 598 Other expenses from ordinary activities Administration (2,237) (1,793) Share based compensation (139) (191) Exploration, evaluation and project generation costs written off (699) (811) ----------- -----------(Loss) before income tax (1,723) (1,751) Income tax (expense) - (1) ----------- -----------(Loss) for half year (1,723) (1,752) (Loss) attributable to minority interest - - ----------- -----------(Loss) attributable to members of Dwyka DiamondsLimited (1,723) (1,752) =========== ===========Basic (loss) cents per share (2.15) (2.41) Diluted (loss) cents per share (2.07) (2.32) The above Consolidated Income Statement should be read in conjunction with theaccompanying notes. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 31 Dec 2005 30 June 2005 Note $'000s $'000s ----------- ------------ CURRENT ASSETSCash and cash equivalents 5,519 9,582Receivables 4,844 1,003Inventories 610 542 ----------- -----------Total Current Assets 10,973 11,127 ----------- ----------- NON-CURRENT ASSETSReceivables 894 2,124Other financial assets 424 76Property, plant & equipment 2,512 1,773Exploration and evaluation expenditure 5,073 1,092Mining properties 2,518 - ----------- -----------Total Non-Current Assets 11,421 5,065 ----------- -----------TOTAL ASSETS 22,394 16,192 ----------- -----------CURRENT LIABILITIESAccounts payable 601 1,101Provisions 690 561 ----------- -----------Total Current Liabilities 1,291 1,662 ----------- -----------NON-CURRENT LIABILITIESDeferred tax liability (971) - ----------- -----------Total Non-Current Liabilities (971) - ----------- -----------TOTAL LIABILITES 2,262 1,662 ----------- -----------NET ASSETS 20,132 14,530 =========== ===========EQUITY Contributed equity 3 56,627 50,726Reserves 2,264 920Accumulated losses (38,759) (37,116) ----------- -----------Total parent entity interest 20,132 14,530Minority interest - - ----------- -----------TOTAL EQUITY 20,132 14,530 =========== =========== The above Consolidated Balance Sheet should be read in conjunction with theaccompanying notes. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR HALF YEAR ENDED 31 DECEMBER 2005 Half-year Half-year Ended Ended 31 Dec 2005 31 Dec 2004 $'000s $'000s ----------- ----------- Total equity at beginning of the half year 14,530 7,549 ----------- ----------- Adjustment on adoption of AASB 132 and AASB 139,net of tax Reserves (82) - Accumulated losses 82 -Re-valuation of other financial assets 99 -Exchange differences on translation of foreign corporations 557 (273) ----------- -----------Net income recognised directly in equity 656 (273)Loss for the half year (1,723) (1,752) ----------- -----------Total recognised income and expense forthe half year (1,067) (2,025) ----------- ----------- Transactions with equity holders in their capacityas equity holders Contributions of equity, net of transaction costs (note 3) 5,901 10,313Share based compensation reserve 139 191Deferred share consideration on purchase of subsidiaries 629 - ----------- ----------- 6,669 10,504 ----------- -----------Total equity at end of the half year 20,132 16,028 =========== =========== Total recognised income and expense for the halfyear is attributable to: Members of Dwyka Diamonds Limited (1,067) (2,025)Minority interest - - ----------- ----------- (1,067) (2,025) ========== =========== The above Consolidated Statement of Changes in Equity should be read inconjunction with the accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWS FOR HALF-YEAR ENDED 31 DECEMBER 2005 Half-year Half-year Ended Ended 31 Dec 2005 31 Dec 2004 $'000s $'000s ----------- -----------CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) 3,852 2,247Payments to suppliers and employees (inclusive of GST) (5,396) (4,588)Interest received 188 269Interest paid 29 - ----------- -----------Net cash outflow from operating activities (1,327) (2,072) ----------- ----------- CASH FLOW FROM INVESTING ACTIVITES Payments for plant & equipment (277) (636)Proceeds from sale of plant and equipment 1 24Payments for other financial assets (250) -Rehabilitation bonds (8) (11)Payment for acquisition of subsidiaries, net ofcash acquired (1,021) -Proceeds from sale of other financial assets 2 -Payment for exploration/mine development (2,107) (961) ----------- -----------Net cash (outflow)/inflow from investingactivities (3,660) (1,584) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Loans to other parties (69) -Loan to associates (2,429) -Proceeds from borrowings - 31Proceeds from issue of shares 3,187 10,856Payment for equity issue costs (107) (543) ----------- -----------Net cash inflows from financing activities 582 10,094 ----------- ----------- Net increase/(decrease) in cash held (4,405) 6,438 Cash at the beginning of the reporting period 9,582 6,632Effect of exchange rate changes on cash 342 1 ----------- -----------Cash at the end of the reporting period 5,519 13,071 =========== =========== The above Consolidated Statement of Cash Flows should be read in conjunctionwith the accompanying notes. NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THEHALF-YEAR ENDED 31 DECEMBER 2005 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This general purpose financial report for the interim half year reporting periodended 31 December 2005 has been prepared in accordance with Accounting StandardAASB 134 Interim Financial Reporting and the Corporations Act 2001. This interim financial report does not include all the notes of the typenormally included in an annual financial report. Accordingly, this report is tobe read in conjunction with the annual report for the year ended 30 June 2005and any public announcements made by Dwyka Diamonds Limited during the interimreporting period in accordance with the continuous disclosure requirements ofthe Corporations Act 2001. (a) Basis of preparation of half-year financial report The principal accounting policies adopted in the preparation of the financialreport are set out below. These policies have been consistently applied to allthe periods presented, unless otherwise stated. Application of AASB 1 First-time Adoption of Australian Equivalents toInternational Financial Reporting Standards This interim financial report is the first Dwyka Diamonds Limited interimfinancial report to be prepared in accordance with Australian Equivalents toInternational Financial Reporting Standards (AIFRSs). AASB 1 First time Adoptionof Australian Equivalents to International Financial Reporting Standards hasbeen applied in preparing these financial statements. Financial statements of Dwyka Diamonds Limited until 30 June 2005 had beenprepared in accordance with previous Australian Generally Accepted AccountingPrinciples (AGAAP). AGAAP differs in certain respects from AIFRS. When preparingthe Dwyka Diamonds Limited interim financial report for the half year ended 31December 2005, management has amended certain accounting, valuation andconsolidation methods applied in the previous AGAAP financial statements tocomply with AIFRS. With the exception of financial instruments, the comparativefigures were restated to reflect these adjustments. The Group has taken theexemption available under AASB 1 to only apply AASB 132 Financial Instruments:Disclosure and Presentation and AASB 139 Financial Instruments: Recognition andMeasurement from 1 July 2005. Reconciliations and descriptions of the effect of transition from previous AGAAPto AIFRSs on the Group's equity and its net income are given in note 6. Historical cost convention These financial statements have been prepared under the historical costconvention, as modified by the revaluation of available-for-sale financialassets, financial assets and liabilities at fair value through profit or lossand certain classes of property, plant and equipment and investment property. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities ofall subsidiaries of Dwyka Diamonds Limited (''company'' or ''parent entity'') asat 31 December 2005 and the results of all subsidiaries for the half-year thenended. Dwyka Diamonds Limited and its subsidiaries together are referred to inthis financial report as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) overwhich the Group has the power to govern the financial and operating policies,generally accompanying a shareholding of more than one-half of the votingrights. The existence and effect of potential voting rights that are currentlyexercisable or convertible are considered when assessing whether the Groupcontrols another entity. Subsidiaries are fully consolidated from the date on which control istransferred to the Group. They are de-consolidated from the date that controlceases. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by the Group (refer to note 1(g)). Intercompany transactions,balances and unrealised gains on transactions between Group companies areeliminated. Unrealised losses are also eliminated unless the transactionprovides evidence of the impairment of the asset transferred. Accountingpolicies of subsidiaries have been changed where necessary to ensure consistencywith the policies adopted by the Group. (ii) Associates Investments in associates are included in Other financial assets on the BalanceSheet. Associates are all entities over which the Group has significantinfluence but not control, generally accompanying a shareholding of between 20%and 50% of the voting rights. Investments in associates are accounted for in theconsolidated financial statements using the equity method of accounting, afterinitially being recognised at cost. The Group's share of its associates' post-acquisition profits or losses isrecognised in the income statement, and its share of post-acquisition movementsin reserves is recognised in reserves. The cumulative post-acquisition movementsare adjusted against the carrying amount of the investment. Dividends receivablefrom associates are recognised in the parent entity's income statement, while inthe consolidated financial statements they reduce the carrying amount of theinvestment. When the Group's share of losses in an associate equals or exceeds its interestin the associate, including any other unsecured receivables, the Group does notrecognise further losses, unless it has incurred obligations or made payments onbehalf of the associate. Unrealised gains on transactions between the Group and its associates areeliminated to the extent of the Group's interest in the associates. Unrealisedlosses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. (c) Segment reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are different tothose of other business segments. A geographical segment is engaged in providingproducts or services within a particular economic environment and is subject torisks and returns that are different from those of segments operating in othereconomic environments. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group's entities aremeasured using the currency of the primary economic environment in which theentity operates ('the functional currency'). The consolidated financialstatements are presented in Australian dollars, which is Dwyka DiamondsLimited's functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. (iii) Group companies The results and financial position of all the Group entities (none of which hasthe currency of a hyperinflationary economy) that have a functional currencydifferent from the presentation currency are translated into the presentationcurrency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of any netinvestment in foreign entities, and of borrowings and other currency instrumentsdesignated as hedges of such investments, are taken to shareholders' equity.When a foreign operation is sold or borrowings repaid a proportionate share ofsuch exchange differences are recognised in the income statement as part of thegain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. (e) Revenue recognition Revenue from sale of goods is measured at fiar value of consideration received,while interest revenue is measured on an effective interest rate basis. Thefollowing specific recognition criteria must also be met before the revenue isrecognised: (i) Sales Control of the goods has passed to the buyer. (ii) Interest Control of the right to receive the interest payment. (f) Income tax The income tax expense or revenue for the period is the tax payable on thecurrent period's taxable income based on the national income tax rate for eachjurisdiction adjusted by changes in deferred tax assets and liabilitiesattributable to temporary differences between the tax bases of assets andliabilities and their carrying amounts in the financial statements, and tounused tax losses. Deferred tax assets are recognised for deductible temporary differences andunused tax losses only if it is probable that future taxable amounts will beavailable to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differencesbetween the carrying amount and tax bases of investments in controlled entitieswhere the parent entity is able to control the timing of the reversal of thetemporary differences and it is probable that the differences will not reversein the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly inequity are also recognised directly in equity. The Australian tax consolidation regime does not apply to the Company. (g) Acquisitions of assets The purchase method of accounting is used to account for all acquisitions ofassets (including business combinations) regardless of whether equityinstruments or other assets are acquired. Cost is measured as the fair value ofthe assets given, shares issued or liabilities incurred or assumed at the dateof exchange plus costs directly attributable to the acquisition. Where equityinstruments are issued in an acquisition, the value of the instruments is theirpublished market price as at the date of exchange. Transaction costs arising onthe issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumedin a business combination are measured initially at their fair values at theacquisition date, irrespective of the extent of any minority interest. Theexcess of the cost of acquisition over the fair value of the Group's share ofthe identifiable net assets acquired is recorded as goodwill. If the cost ofacquisition is less than the fair value of the net assets of the subsidiaryacquired, the difference is recognised directly in the income statement, butonly after a reassessment of the identification and measurement of the netassets acquired. Where settlement of any part of cash consideration is deferred, the amountspayable in the future are discounted to their present value as at the date ofexchange. (h) Impairment of assets Assets that have an indefinite useful life are not subject to amortisation andare tested annually for impairment. Assets that are subject to amortisation arereviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount may not be recoverable. An impairment loss isrecognised for the amount by which the asset's carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset's fairvalue less costs to sell and value in use. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there areseparately identifiable cash flows (cash generating units). (i) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call withfinancial institutions, other short-term, highly liquid investments withoriginal maturities of three months or less that are readily convertible toknown amounts of cash and which are subject to an insignificant risk of changesin value, and bank overdrafts. (j) Trade receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost, less provision for doubtful debts. Trade receivablesare due for settlement no more than 30 days from the date of recognition.Collectibility of trade receivables is reviewed on an ongoing basis. Debts whichare known to be uncollectible are written off. A provision for doubtfulreceivables is established when there is objective evidence that the Group willnot be able to collect all amounts due according to the original terms ofreceivables. The amount of the provision is the difference between the asset'scarrying amount and the present value of estimated future cash flows, discountedat the effective interest rate. The amount of the provision is recognised in theincome statement. (k) Inventories Inventories, which include rough diamonds and raw materials, are stated at thelower of cost, cost of production and estimated net realisable value. Cost isdetermined on a first-in, first-out basis. Net realisable value is the estimatedselling price in the ordinary course of business, less the cost of completionand selling expenses. (l) Investments and other financial assets From 1 July 2004 to 30 June 2005 The Group has taken the exemption available under AASB 1 to apply AASB 132 andAASB 139 only from 1 July 2005. The Group has applied previous AGAAP to thecomparative information on financial instruments within the scope of AASB 132and AASB 139. For further information on previous AGAAP refer to the annualreport for the year ended 30 June 2005.Adjustments on transition date: 1 July 2005 The nature of the main adjustments to make this information comply with AASB 132and AASB 139 are that, with the exception of held-to-maturity investments andloans and receivables which are measured at amortised cost (refer below), fairvalue is the measurement basis. Fair value is exclusive of transaction costs.Changes in fair value are either taken to the income statement or an equityreserve (refer below). At the date of transition (1 July 2005) changes tocarrying amounts are taken to retained earnings or reserves. From 1 July 2005 The Group classifies its investments in the following categories: financialassets at fair value through profit or loss, loans and receivables,held-to-maturity investments, and available-for-sale financial assets. Theclassification depends on the purpose for which the investments were acquired.Management determines the classification of its investments at initialrecognition and re-evaluates this designation at each reporting date. (i) Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading, andthose designated at fair value through profit or loss on initial recognition. Afinancial asset is classified in this category if acquired principally for thepurpose of selling in the short term or if so designated by management. Thepolicy of management is to designate a financial asset if there exists thepossibility it will be sold in the short term and the asset is subject tofrequent changes in fair value. Assets in this category are classified ascurrent assets if they are either held for trading or are expected to berealised within 12 months of the balance sheet date. (ii) Loans and receivables Loans and receivables are non derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arise whenthe Group provides money, goods or services directly to a debtor with nointention of selling the receivable. They are included in current assets, exceptfor those with maturities greater than 12 months after the balance sheet datewhich are classified as non-current assets. Loans and receivables are includedin receivables in the balance sheet. (iii) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equitysecurities, are non-derivatives that are either designated in this category ornot classified in any of the other categories. They are included in non-currentassets unless management intends to dispose of the investment within 12 monthsof the balance sheet date. Purchases and sales of investments are recognised on trade-date - the date onwhich the Group commits to purchase or sell the asset. Investments are initiallyrecognised at fair value plus transaction costs for all financial assets notcarried at fair value through profit or loss. Financial assets are derecognisedwhen the rights to receive cash flows from the financial assets have expired orhave been transferred and the Group has transferred substantially all the risksand rewards of ownership. Available-for-sale financial assets and financial assets at fair value throughprofit and loss are subsequently carried at fair value. Loans and receivablesand held-to-maturity investments are carried at amortised cost using theeffective interest method. Realised and unrealised gains and losses arising fromchanges in the fair value of the 'financial assets at fair value through profitor loss' category are included in the income statement in the period in whichthey arise. Unrealised gains and losses arising from changes in the fair valueof non monetary securities classified as available-for-sale are recognised inequity in the available-for-sale investments revaluation reserve. Whensecurities classified as available-for-sale are sold or impaired, theaccumulated fair value adjustments are included in the income statement as gainsand losses from investment securities. The fair values of quoted investments are based on current bid prices. If themarket for a financial asset is not active (and for unlisted securities), theGroup establishes fair value by using valuation techniques. These includereference to the fair values of recent arm's length transactions, involving thesame instruments or other instruments that are substantially the same,discounted cash flow analysis, and option pricing models refined to reflect theissuer's specific circumstances. The Group assesses at each balance date whether there is objective evidence thata financial asset or group of financial assets is impaired. In the case ofequity securities classified as available for sale, a significant or prolongeddecline in the fair value of a security below its cost is considered indetermining whether the security is impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss - measured as thedifference between the acquisition cost and the current fair value, less anyimpairment loss on that financial asset previously recognised in profit and loss- is removed from equity and recognised in the income statement. Impairmentlosses recognised in the income statement on equity instruments are not reversedthrough the income statement. (m) Fair value estimation The fair value of financial assets and financial liabilities must be estimatedfor recognition and measurement or for disclosure purposes.The fair value of financial instruments traded in active markets (such aspublicly traded derivatives, and trading and available-for-sale securities) isbased on quoted market prices at the balance sheet date. The quoted market priceused for financial assets held by the Group is the current bid price; theappropriate quoted market price for financial liabilities is the current askprice. The fair value of financial instruments that are not traded in an active market(for example, over-the-counter derivatives) is determined using valuationtechniques. The Group uses a variety of methods and makes assumptions that arebased on market conditions existing at each balance date. Quoted market pricesor dealer quotes for similar instruments are used for long-term debt instrumentsheld. Other techniques, such as estimated discounted cash flows, are used todetermine fair value for the remaining financial instruments. The fair value ofinterest-rate swaps is calculated as the present value of the estimated futurecash flows. The fair value of forward exchange contracts is determined usingforward exchange market rates at the balance sheet date. The nominal value less estimated credit adjustments of trade receivables andpayables are assumed to approximate their fair values. The fair value offinancial liabilities for disclosure purposes is estimated by discounting thefuture contractual cash flows at the current market interest rate that isavailable to the Group for similar financial instruments. (n) Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation.Historical cost includes expenditure that is directly attributable to theacquisition of the items. 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. Land is not depreciated. Depreciation on other assets is calculated using thestraight line method to allocate their cost or revalued amounts, net of theirresidual values, over their estimated useful lives, as follows: - Buildings 10-20 years - Machinery 5-12 years - Vehicles 3-5 years - Furniture, fittings and equipment 3-8 years The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amountif the asset's carrying amount is greater than its estimated recoverable amount(note 1(h)). Gains and losses on disposals are determined by comparing proceeds with carryingamount. These are included in the income statement. (o) Exploration and evaluation expenditure The Company's policy with respect to exploration and evaluation expenditure isto use the "area of interest" method. Under this method, exploration andevaluation costs are carried forward on the following basis: (i) Each area of interest is considered separately when deciding whether and to what extent to carry forward or write off exploration and evaluation costs; (ii) Exploration and evaluation costs related to an area of interest may be carried forward provided that rights to tenure of the area of interest are current and provided further that one of the following conditions are met: • such costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively, by its sale; or • exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing. Exploration and evaluation costs accumulated in respect to each particular area of interest includes only net direct expenditure; (iii) The carrying values of exploration and evaluation costs are reviewed by directors where results of exploration and/or evaluation of an area of interest are sufficiently advanced to permit a reasonable estimate of the costs expected to be recouped through successful development and exploitation of the area of interest or by its sale. Expenditure in excess of this estimate is written off to the profit and loss account in the year in which the review occurs; (iv) When development of an area of interest is complete and production commences, all exploration, evaluation and development costs carried forward as an asset (including the cost of extractive rights acquired) are transferred to proven properties. Development costs related to an area of interest are carried forward as an asset to the extent that they are expected to be recovered either through sale or successful exploitation; and (v) The carrying values of exploration, evaluation and development expenditure are carried forward and amortised over the expected useful life of each # project. (p) Mining properties Mine properties represent the acquisition costs and/or accumulation ofexploration, evaluation and development costs in respect of areas of interest inwhich mining has commenced. When further development expenditure is incurred in respect of a mine propertyafter the commencement of production, such expenditure is carried forward aspart of the mine property only when substantial future economic benefits arethereby established, otherwise such expenditure is classified as part of thecost of production. Amortisation is provided on a unit-of-production basis so as to write off thecost in proportion to the depletion of the proved and probable mineralresources. (q) Trade and other payables These amounts represent liabilities for goods and services provided to the Groupprior to the end of financial year which are unpaid. The amounts are unsecuredand are usually paid within 30 days of recognition. (r) Provisions Provisions are recognised when the economic entity has a legal, equitable orconstructive obligation to make a future sacrifice of economic benefits to otherentities as a result of past transactions or other past events, it is probablethat a future sacrifice of economic benefits will be required and a reliableestimate can be made of the amount of the obligation. (s) Borrowings and borrowing costs Borrowings are initially recognised at fair value, net of transaction costsincurred. Borrowings are subsequently measured at amortised cost. Any differencebetween the proceeds (net of transaction costs) and the redemption amount isrecognised in the income statement over the period of the borrowings using theeffective interest method. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. Borrowing costs are recognised as expenses in the period in which they areincurred. (t) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annualleave and accumulating sick leave expected to be settled within 12 months of thereporting date are recognised in other payables in respect of employees'services up to the reporting date and are measured at the amounts expected to bepaid when the liabilities are settled. Liabilities for non-accumulating sickleave are recognised when the leave is taken and measured at the rates paid orpayable. (ii) Long service leave The liability for long service leave is recognised in the provision for employeebenefits and measured as the present value of expected future payments to bemade in respect of services provided by employees up to the reporting date usingthe projected unit credit method. Consideration is given to expected future wageand salary levels, experience of employee departures and periods of service.Expected future payments are discounted using market yields at the reportingdate on national government bonds with terms to maturity and currency thatmatch, as closely as possible, the estimated future cash outflows. (iii) Share-based payments Share-based compensation benefits are provided to employees via the DwykaDiamonds Employee Share and Option Plan. Shares and options granted before 7 November 2002 and/or vested before 1 January2005 No expense is recognised in respect of these shares or options. The sharecapital is recognised when either, the share purchase loan is repaid or when theoptions are exercised, and the proceeds received allocated to share capital.Shares options granted after 7 November 2002 and vested after 1 January 2005The fair value of shares and options granted under the Dwyka Diamonds EmployeeShare and Option Plans are recognised as an employee benefit expense with acorresponding increase in equity. The fair value is measured at grant date andrecognised over the period during which the employees become unconditionallyentitled to the shares and/or options. The fair value at grant date is independently determined using a Black-Scholesoption pricing model that takes into account the exercise price, the term of theoption, the vesting and performance criteria, the impact of dilution, thenon-tradeable nature of the option, the share price at grant date and expectedprice volatility of the underlying share, the expected dividend yield and therisk-free interest rate for the term of the option. The value of shares issued to employees financed by way of a non-recourse loanunder the employee share scheme is recognised with a corresponding increase inequity when the Company receives funds from either the employees repaying theloan or upon the loan termination. (u) Contributed equity Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares or options are shown in equity as adeduction, net of tax, from the proceeds. Incremental costs directlyattributable to the issue of new shares or options, or for the acquisition of abusiness, are included in the cost of the acquisition as part of the purchaseconsideration. (v) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable toequity holders of the company, excluding any costs of servicing equity otherthan ordinary shares, by the weighted average number of ordinary sharesoutstanding during the half-year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination ofbasic earnings per share to take into account the after income tax effect ofinterest and other financing costs associated with dilutive potential ordinaryshares and the weighted average number of shares assumed to have been issued forno consideration in relation to dilutive potential ordinary shares. (w) Financial instrument transaction costs The Group has taken the exemption available under AASB 1 to apply AASB 132 andAASB 139 from 1 July 2005. The Group has applied previous Australian GAAP(AGAAP) in the comparative information on financial instruments within the scopeof AASB 132 and AASB 139. Under previous AGAAP transaction costs were excludedfrom the amounts disclosed in the financial statements. Under AIFRS such costsare included in the carrying amounts. At the date of transition to AASB 132 andAASB 139 the adjustment to carrying amounts for the Group was immaterial. (x) Rounding of amounts The company is of a kind referred to in Class order 98/0100, issued by theAustralian Securities and Investments Commission, relating to the ''roundingoff'' of amounts in the financial report. Amounts in the financial report havebeen rounded off in accordance with that Class Order to the nearest thousanddollars, or in certain cases, the nearest dollar. 2. SEGMENT INFORMATION The consolidated entity operates primarily in three geographical segments beingAfrica, India and Australia where it conducts primarily diamond mining andexploration. Inter- segmentHalf-year 2005 Africa Australia India eliminations/ Consolidated $'000s $'000s $'000 unallocated $'000s $'000s Total segmentrevenue 3,896 1 - 188 4,085 ================================================================ Total segmentresult (682) (1,272) (8) 239 (1,723) ================================================================ Inter- segmentHalf-year 2004 Africa Australia India eliminations/ Consolidated $'000s $'000s $'000 unallocated $'000s $'000sTotal segementrevenue 2,413 - - 269 2,682 ================================================================ Segment result (824) (1,469) (10) 551 (1,752) ================================================================ 3. EQUITY SECURITIES ISSUED Movements in ordinary share capital during the period were: Date Details Issue Number of price shares $ -------------------------Fully paid ordinary shares1/7/2004 Opening balance 61,057,696 40,352,044 10/8/04 Placement GBP0.26 16,532,500 10,856,11513/9/04 ($A0.67) Total issue costs - (542,809) -------------------------31/12/2004 Balance 77,590,196 50,665,350 ------------------------- Employee Share plan shares issued with limited recourse employee loans 1/7/2004 Opening balance 2,850,000 - ------------------------- Total ordinary shares 80,440,196 50,665,35031/12/2004 on issue ========================= Fully paid ordinary shares1/7/2005 Opening balance 77,706,862 50,726,016 30/8/05 Mine purchase GBP0.35 2,747,802 2,308,154 consideration (A$0.84)4/11/05 Placement GBP0.30 4,500,000 3,187,067 ($A0.72)22/12/05 Placement in lieu of A$0.685 749,137 513,159 services rendered Total issue costs (107,416) ------------------------31/12/2005 Balance 85,703,801 56,626,980 ------------------------ Employee Share plan shares issued with limited recourse employee loans 1/7/2005 Opening balance 2,733,334 - 21/12/05 Employee share plan issue *(a) 750,000 -21/12/05 Employee share plan issue *(b) 3,350,000 - ------------------------31/12/2005 Balance 6,833,334 - ------------------------31/12/2005 Total ordinary shares on 92,537,135 56,626,980 issue ======================== * Shares issued at (a) $0.87 and (b) $1.00 in accordance with the Dwyka DiamondsEmployee Share Plan funded by way of a limited recourse loan repayable in 3years from the date of issue. The equity contribution from these shares will berecognised upon receipt of funds by the Company at the later of the loan beingrepaid by the employee or from funds recovered at the termination of the loan inaccordance with the Share Plan terms and conditions. 4 BUSINESS COMBINATION On 1 September 2005 the parent entity effected the acquisition of 100% of theissued share capital of Kophia Diamonds Pty Ltd and Bellsbank Mining Number OnePty Ltd. These entities were acquired as a single business acquisitiontransaction. Together these companies own 3 underground mines in South Africa. Theconsideration for this purchase is the issue of 2,747,802 shares and the paymentof ZAR5 million to the vendors of the companies. This acquisition incorporatesthe provision of future services to the Company by the vendors and includesoperational targets for the mines acquired. The acquired business contributed revenues of $299,094 and a net loss of $41,614to the Group for the period from 1 October 2005 to 31 December 2005. If theacquisition had occurred on 1 July 2005, the acquired business would havecontributed revenues of $299,094 and a net loss of $112,978 to the Group. Details of the fair value of the assets and liabilities acquired and goodwillare as follows: AUD $'000sPurchase consideration:Cash paid (ZAR5 million) 1,021Parent company shares (valued at the market price of those sharesas at the date of acquisition) 2,308Deferred issue of Parent company shares (valued at the marketprice 629of those shares as at the date of acquisition) ----------Total purchase consideration 3,958Fair value of net identifiable assets acquired 3,958 ----------Goodwill - ========== At the date of acquisition it is considered probable that at least a further749,400 parent company shares will be issued as additional consideration for theacquisition. This deferred share issue has been valued at the market price ofthose shares as at the date of acquisition. Further in the event that certainpre-determined mine performance hurdles are achieved by the subsidiary,additional consideration in the form of shares and options may be payable. It isnot possible to determine if additional shares and/or options will be issued. The fair value of assets and liabilities acquired are based on discounted cashflow models. No acquisition provisions were created. There were no acquisitionsin the half-year ended 31 December 2004. The assets and liabilities arising from the acquisition are as follows : Carrying amount Fair value $'000s $'000s Receivables 207 35Inventories 345 345Plant and equipment 818 818Exploration - 3,476Mine property/development 170 1,074Deferred tax asset 149 -Trade payables (45) (45)Deferred tax liability - (971)Non-current liabilities (2,167) (774) ---------- --------- Net identifiable assets acquired (523) 3,958 ========== ========= 5. SUBSEQUENT EVENTS No matters or circumstances have arisen since 31 December 2005 that havesignificantly affected, or may significantly affect: a) the consolidated entity's operations in the future financial periods, b) the results of those operations in future financial periods, and c) the consolidated entity's state of affairs in future financial periods. 6. EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS'S (1) Reconciliation of equity reported under previous Australian GenerallyAccepted Accounting Principles (AGAAP) to equity under Australianequivalents to IFRSs (AIFRS) (a) At the date of transition to AIFRS: 1 July 2004 Effect of Previous transition to AGAAP AIFRS AIFRS Notes $'000s $'000s $'000sASSETSCurrent assetsCash and cashequivalents 6,632 - 6,632Receivables 547 - 547Inventories 250 - 250 -----------------------------------Total current assets 7,429 - 7,429 -----------------------------------Non-current assetsReceivables 4(a) 1,627 (1,482) 145Other financial assets 89 - 89Property, plantand equipment 4(b), 4(c) 3,054 (1,683) 1,371 -----------------------------------Total non-current assets 4,770 (3,165) 1,605 -----------------------------------Total assets 12,199 (3,165) 9,034 -----------------------------------LIABILITIESCurrent liabilitiesPayables 982 - 982Provisions 503 - 503 -----------------------------------Total currentliabilities 1,485 - 1,485 -----------------------------------Total liabilities 1,485 - 1,485 -----------------------------------Net assets 10,714 (3,165) 7,549 =================================== EQUITYContributed equity 4(a) 41,834 (1,482) 40,352Reserves 4(a) - 173 173Accumulated losses 4(a), 4(b), (31,120) (1,856) (32,976) 4(c) -----------------------------------Parent entity interest 10,714 (3,165) 7,549Minority interest - - - -----------------------------------Total equity 10,714 (3,165) 7,549 =================================== (b) At the end of the last half-year reporting period under previous AGAAP: 31 December 2004 Effect of Previous transition to AGAAP AIFRS AIFRS Notes $'000s $'000s $'000s ASSETSCurrent assetsCash and cashequivalents 13,071 - 13,071Receivables 776 - 776Inventories 367 - 367 -----------------------------------Total current assets 14,214 - 14,214 -----------------------------------Non-current assetsReceivables 4(a) 1,888 (1,482) 406Other financial assets 89 - 89Property, plantand equipment 4(b), 4(c) 3,515 (1,709) 1,806Exploration,evaluation andmining properties 631 - 631 -----------------------------------Total non-current assets 6,123 (3,191) 2,932 -----------------------------------Total assets 20,337 (3,191) 17,146 -----------------------------------LIABILITIESCurrent liabilitiesPayables 594 - 594Interest bearingliabilities 31 - 31Provisions 493 - 493 -----------------------------------Total currentliabilities 1,118 - 1,118 -----------------------------------Total liabilities 1,118 - 1,118 -----------------------------------Net assets 19,219 (3,191) 16,028 =================================== EQUITYContributed equity 4(a) 52,147 (1,482) 50,665Reserves 4(a), 4(c) - 91 91Accumulated losses 4(a), 4(b), (32,928) (1,800) (34,728) 4(c) -----------------------------------Parent entityinterest 19,219 (3,191) 16,028Minority interest - - - -----------------------------------Total equity 19,219 (3,191) 16,028 =================================== (c) At the end of the last reporting period under previous AGAAP: 30 June 2005 Effect of Previous transition to AGAAP AIFRS AIFRS Notes $'000s $'000s $'000s ASSETSCurrent assetsCash and cashequivalents 9,582 - 9,582Receivables 1,003 - 1,003Inventories 542 - 542 -----------------------------------Total current assets 11,127 - 11,127 -----------------------------------Non-current assetsReceivables 4(a) 3,545 (1,421) 2,124Other financial assets 76 - 76Property, plantand equipment 4(b), 4(c) 3,582 (1,809) 1,773Exploration,evaluation andmining properties 1,092 - 1,092 -----------------------------------Total non-current assets 8,295 (3,230) 5,065 -----------------------------------Total assets 19,422 (3,230) 16,192 ===================================LIABILITIESCurrent liabilitiesPayables 1,101 - 1,101Provisions 561 - 561 -----------------------------------Total currentliabilities 1,662 - 1,662 -----------------------------------Total liabilities 1,662 - 1,662 -----------------------------------Net assets 17,760 (3,230) 14,530 =================================== EQUITY Contributed equity 4(a) 52,147 (1,421) 50,726Reserves 4(a), 4(c) - 920 920Accumulated losses 4(a0, 4(b), (34,387) (2,729) (37,116) 4(c) -----------------------------------Parent entityinterest 17,760 (3,230) 14,530Minority interest - - - -----------------------------------Total equity 17,760 (3,230) 14,530 =================================== (2) Reconciliation of profit under previous AGAAP to profit under Australian equivalents to IFRSs (AIFRS) (a) Reconciliation of profit for the half-year ended 31 December 2004 Effect of Previous transition to AGAAP AIFRS AIFRS Notes $'000s $'000s $'000s RevenueRevenue from saleof goods 2,366 - 2,366Cost of sales 4(b) (1,904) (16) (1,920) ----------------------------------- 462 (16) 446Other income 316 - 316Other expenses from ordinaryactivitiesAdministration (1,793) - (1,793)Share basedcompensation 4(a) - (191) (191)Exploration,evaluation andproject generationcosts (811) - (811)Foreign exchangegains/(losses) 4(c) 19 263 282 -----------------------------------Loss before incometax (1,807) 56 (1,751)Income tax expense (1) - (1) -----------------------------------Loss for thehalf-year (1,808) 56 (1,752)Loss attributable to minority - - -interest -----------------------------------Loss attributableto members ofDwyka DiamondsLimited (1,808) 56 (1,752) =================================== (b) Reconciliation of profit for the year ended 30 June 2005 Effect of Previous transition to AGAAP AIFRS AIFRS Notes $'000s $'000s $'000s RevenueRevenue from saleof goods 5,164 - 5,164Cost of sales 4(b) (3,891) (31) (3,922) ----------------------------------- 1,273 (31) 1,242Other income 628 - 628Other expenses from ordinaryactivitiesAdministration (3,994) - (3,994)Share basedcompensation 4(a) - (346) (346)Charges againstassets (212) - (212)Exploration,evaluation andproject generationcosts (580) - (580)Foreign exchangegains/(losses) 4(c) (382) (496) (878) -----------------------------------Loss before incometax (3,267) (873) (4,140)Income tax expense - - - -----------------------------------Loss for the year (3,267) (873) (4,140)Loss attributable to minority - - -interest -----------------------------------Loss attributableto members ofDwyka DiamondsLimited (3,267) (873) (4,140) ==================================== (3) Reconciliation of cash flow statement for the year ended 30 June 2005 The adoption of AIFRSs has not resulted in any material adjustments to the cashflow statement. (4) Notes to the reconciliations (a) Share-based payments Under AASB 2 Share-based Payment from 1 July 2004 the Group is required torecognise an expense for those shares and options that were issued to employeesunder the Dwyka Diamonds Employee Share and Option Plan after 7 November 2002but that had not vested by 1 January 2005. In addition the treatment of theshares issued under the Plan changes in that as the shares are financed by alimited recourse loan there is no equity recognised until the employee loan isrepaid in accordance with the Plan terms (Refer Note 3) The effects of thesechanges are: (i) At 1 July 2004 For the Group there has been an increase in accumulated losses of $173,000 and acorresponding increase in reserves. Non-current receivables decreases by$1,482,000 and contributed equity decreases by the same amount. (ii) At 31 December 2004 For the Group there has been an increase in accumulated losses of $364,000 and acorresponding increase in reserves. Non-current receivables decreases by$1,482,000 and contributed equity decreases by the same amount. (iii) At 30 June 2005 For the Group there has been an increase in accumulated losses of $519,000 and acorresponding increase in reserves. Non-current receivables decreases by$1,421,000 and contributed equity decreases by the same amount. (iv) For the half-year ended 31 December 2004 For the Group there has been an increase in employee benefits expense of$191,000. (v) For the year ended 30 June 2005 For the Group there has been an increase in employee benefits expense of$346,000 (b) Impairment The assessment of recoverable amount of the plant and equipment utilised by theGroup's South African based industrial division has been reviewed. When thisassessment was made under previous AGAAP, the recoverable amount was estimatedon an undiscounted basis. Using a discount rate of 8% to arrive at value-in-use,at the date of transition an impairment of $25,000 existed. The effect of thisis: (i) At 1 July 2004 For the Group there has been a decrease in plant and equipment of $25,000 whileaccumulated losses has increased by the same amount. (ii) At 31 December 2004 For the Group there has been a decrease in plant and equipment of $41,000 whileaccumulated losses has increased by the same amount. (iii) At 30 June 2005 For the Group there has been a decrease in plant and equipment of $56,000 whileaccumulated losses has increased by the same amount. (iv) For the half-year ended 31 December 2004 For the Group depreciation expense has increased by $16,000. (v) For the year ended 30 June 2005 For the Group depreciation expense has increased by $31,000. (c) Foreign currency translation reserve Under AIFRS the Group has elected to apply the period closing exchange rate fortranslation of controlled entity non-monetary items upon consolidation withexchange translation differences being represented by a foreign currencytranslation reserve. Under AGAAP the Group was translating these non-monetaryitems at historical exchange rates. Further, the Group has elected to apply the exemption in AASB 1 First-timeAdoption of Australian Equivalents to International Financial ReportingStandards. The cumulative translation differences for all foreign operationscalculated above and represented in the foreign currency translation reserve aredeemed to be zero at the date of transition to AIFRSs. This transition dateadjustment carries through to each subsequent period. The effects of the above are: (i) At 1 July 2004 For the Group plant and equipment is reduced by $1,658,000 while accumulatedlosses are increased by the same amount (ii) At 31 December 2004 For the Group plant and equipment is reduced by $1,668,000 while accumulatedlosses are increased by $1,395,000 and the foreign currency translation reserveis recognised at $(273,000). (iii) At 30 June 2005 For the Group plant and equipment is reduced by $1,753,000 while accumulatedlosses are increased by $2,154,000 and the foreign currency translation reserveis recognised at $401,000. (iv) For the half-year ended 31 December 2004 For the Group, accumulated losses have reduced by $263,000. (v) For the year ended 30 June 2005 For the Group, accumulated losses have increased by $496,000. (d) Accumulated losses The effect on accumulated losses of the changes set out above are as follows: 1 July 2004 31 December 2004 30 June 2005 Notes $'000s $'000s $'000sForeign currencytranslation reserve 4(c) (1,658) (1,395) (2,154)Impairment 4(b) (25) (41) (56)Share-based payments 4(a) (173) (364) (519) --------- --------- ---------Total adjustment (1,856) (1,800) (2,729) --------- --------- --------- DWYKA DIAMONDS LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' DECLARATION In the Directors' opinion: a) the financial statements and notes set out on pages 7 to 28 are in accordance with the Corporations Act 2001, including: (i) comply with Accounting Standards the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2005 and of its performance, as represented by the results of its operations, changes in equity and its cash flows, for the half-year ended on that date; and b) there are reasonable grounds to believe that Dwyka Diamonds Limited 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 Directors. M SturgessExecutive Chairman Dated at Perth, this 16th day of March 2006. Independent review report to the members of Dwyka Diamonds Limited 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 of Dwyka DiamondsLimited: • does not give a true and fair view, as required by theCorporations Act 2001 in Australia, of the financial position of the DwykaDiamonds Group (defined below) as at 31 December 2005 and of its performance forthe half-year ended on that date, and • is not presented in accordance with the Corporations Act 2001,Accounting Standard AASB 134: Interim Financial Reporting and other mandatoryfinancial reporting requirements in Australia, and the Corporations Regulations2001. This statement must be read in conjunction with the rest of our review report. Scope The financial report and directors' responsibility The financial report comprises the balance sheet, income statement, statement ofchanges in equity, cash flow statement, accompanying notes to the financialstatements, and the directors' declaration for the Dwyka Diamonds Group (theconsolidated entity), for the half-year ended 31 December 2005. The consolidatedentity comprises both Dwyka Diamonds Limited (the company) and the entities itcontrolled during that half-year. The directors of the company are responsible for the preparation and true andfair presentation of the financial report in accordance with the CorporationsAct 2001. This includes responsibility for the maintenance of adequateaccounting records and internal controls that are designed to prevent and detectfraud and error, and for the accounting policies and accounting estimatesinherent in the financial report. Review approach We conducted an independent review in order for the company to lodge thefinancial report with the Australian Securities and Investments Commission. Ourreview was conducted in accordance with Australian Auditing Standards applicableto review engagements. For further explanation of a review, visit our websitehttp://www.pwc.com/au/financialstatementaudit. We performed procedures in order to state whether, on the basis of theprocedures described, anything has come to our attention that would indicatethat the financial report does not present fairly, in accordance with theCorporations Act 2001, Accounting Standard AASB 134: Interim Financial Reportingand other mandatory financial reporting requirements in Australia, a view whichis consistent with our understanding of the consolidated entity's financialposition, and its performance as represented by the results of its operations,changes in equity 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. Our procedures include reading the other information included with the financialreport to determine whether it contains any material inconsistencies with thefinancial report. These procedures do not provide all the evidence that would be required in anaudit, thus the level of assurance provided is less than that given in an audit.We have not performed an audit, and accordingly, we do not express an auditopinion. 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. Our review did not involve an analysis of the prudence of business decisionsmade by directors or management. Independence In conducting our review, we followed applicable independence requirements ofAustralian professional ethical pronouncements and the Corporations Act 2001. PricewaterhouseCoopers David Smith Perth Partner 16 March 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Nyota Minerals