MINERALS CORPORATION LIMITED HALF YEAR FINANCIAL REPORT 31 December 2010 1
CORPORATE DIRECTORY Directors Gary Steinepreis Executive Director Patrick Burke Executive Director Bevan Tarratt Non executive Director Company Secretary Registered Office Share Registry Auditors Stock Exchange Listing Gary Steinepreis Level 1, 33 Ord Street West Perth Western Australia 6005 Telephone: 08 9420 9300 Computershare Investor Services Pty Limited Level 2 / 45 St Georges Terrace Perth Western Australia 6000 Telephone: 1300 850 505 Overseas: +61 3 9415 4000 Facsimile: +61 8 9323 2033 BDO Audit (WA) Pty Ltd 38 Station Street Subiaco Western Australia 6008 Telephone: 08 6382 4600 Minerals Corporations Limited shares are listed on the Australian Securities Exchange, home branch, Perth Code: MSC (currently suspended) 2
DIRECTORS REPORT Your directors submit the financial report of the consolidated entity for the half year ended 31 December 2010. Directors The name of each person who has been a director during the year and continues in office at the date of this report are: Gary Steinepreis appointed on 17 February 2011. Patrick Burke appointed on 17 February 2011. Bevan Tarratt appointed on 17 February 2011. The names of each person who were directors during the year and resigned prior to the date of this report are: Charles Victor Alexander appointed on 1 July 1983 and resigned on 17 February 2011. Douglas William Sutherland appointed on 16 January 2002 and resigned on 17 February 2011. James Edward Marsh appointed on 27 November 2009 and resigned on 17 February 2011. George Birch appointed on 14 July 2003 and resigned on 27 November 2009. Company Secretary The company secretary is Gary Steinepreis. Mr Steinepreis was appointed to the position of company secretary on 17 February 2011. Mr Steinepreis is also a director of the Company and information on him and his qualifications are included under the information on directors. The former company secretary was Robert Lo who had been in the position since 22 December 2000. Principal Activities The principal continuing activities of the Company is mineral exploration and development of mineral projects. Significant Changes in the State of Affairs and Review of Operations On 15 June 2010, the securities of the Company were suspended from quotation on the Official List of the ASX at the request of the Company. On the same date the directors of the Company appointed Martin Green and Glenn Miller of BRI Ferrier as Joint and Several Administrators of the Company (Administrators) pursuant to Section 436A of the Corporations Act. The second meeting of creditors of the Company was held on 20 July 2010 and was adjourned for up to 45 business days to allow the Administrators additional time to consider proposals for a Deed of Company Arrangement for the Company and to gather sufficient further information to ensure that creditors could make an informed decision regarding the future of the Company. At the reconvened second meeting of creditors of the Company held on 16 September 2010, the Administrators recommended to the creditors that, in the opinion of the Administrators, it was in the best interests of creditors to approve the execution of a Deed of Company Arrangement to facilitate the Recapitalisation Proposal put forward by Ascent Capital. This meeting resolved to approve the execution of a Deed of Company Arrangement and the Deed of Company Arrangement was executed on 6 October 2010. The Deed of Company Arrangement, subject to certain conditions including Shareholder approval of the Recapitalisation Proposal, required that an amount of $750,000 and certain assets and rights of the Company be transferred by the Company to a creditors trust to be available for the satisfaction of the claims of creditors and to meet the costs of the Administrators and Deed Administrators. Ascent Capital arranged $750,000 in loan funds, via a conditional loan agreement, to enable the Company to meet the terms of the Deed of Company Arrangement. Nominees of Ascent Capital being Gary Steinepreis, Bevan Tarratt and Patrick Burke were appointed Directors of the Company on 17 February 2011. At the Shareholders Meeting held on 19 April 2011 Shareholders approved the Recapitalisation Proposal. 3
Following the meeting of Shareholders the final matters relating to the Administration were addressed and the Company was released from Administration on 19 April 2011. All assets of the Company, save for the Tenements, have been disposed of by operation of the Deed of Company Arrangement. All creditors are bound by the Deed of Company Arrangement, all claims against the Company have been released and there are no residual liabilities or potential recovery from former creditors against the Company. The Company raised equity capital to complete the restructuring and recapitalisation and has received conditional approval for the reinstatement of its securities to the ASX. Upon satisfaction of those listing conditions the Company s securities will be requoted on the ASX, one of which is the completion of the outstanding financial reports. In April 2011, the Company completed the equity capital raising ($2,508,500) required to complete the restructuring and recapitalisation approved by shareholders. The Company issued and allotted 325,000,000 ordinary shares and 50,000,000 unlisted options as approved by shareholders. Operating Result The consolidated profit for the half year was $0.002 million (2009: Loss $6.208 million). After Balance Date Events Subsequent to the reporting date the following significant events occurred: On 7 December 2010 a special class meeting of preference shareholders approved a variation to the terms of the preference shares. The 19,361,930 preference shares were subsequently redeemed during January 2011 and 19,361,930 ordinary shares were issued. The $136 paid to the preference shareholders was funded by a placement of 13,600 ordinary shares. At a general meeting of ordinary shareholders held on 19 April 2011 the shareholders approved the following: o Consolidation of capital at 1 for 10; o Issue of 75,000,000 ordinary shares at $0.0001 per share; o Issue of 250,000,000 ordinary shares at $0.01 per share; o Issue of 50,000,000 options to acquire ordinary shares at a price of $0.01 each on or before 31 December 2015. On 28 April 2011 the Company lodged a prospectus for the raising of $2,508,500 before costs as part of the recapitalisation of the Company. As at the date of this report the Company has completed its capital raising pursuant to the prospectus dated 28 April 2011 and received conditional approval for the reinstatement of its securities to the ASX. Upon satisfaction of those listing conditions the Company s securities will be requoted on the ASX. Other than as disclosed, there has been no matter or circumstance that has arisen that has significantly affected, or may significantly affect: 1. the consolidated entities operations in future financial years, or 2. the results of those operations in future financial years, or 3. the consolidated entities state of affairs in future financial years. ROUNDING OF AMOUNTS The consolidated entity has applied the relief available to it in ASIC Class Order 98/100 and accordingly certain amounts in the financial report and the directors report have been rounded off to the nearest thousand dollars. AUDITOR S INDEPENDENCE DECLARATION The lead auditor s independence declaration under section 307C of the Corporation Act 2001 is set out on page 5 for the half year ended 31 December 2010 and forms part of this report. This report is signed in accordance with a resolution of the Board of Directors. Gary Steinepreis Director West Perth 1 August 2011 4
Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 1 August 2011 Minerals Corporation Limited The Board of Directors Level 1, 33 Ord Street West Perth, WA, 6005 Dear Sirs, DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF MINERALS CORPORATION LIMITED As lead auditor for the review of Minerals Corporation Limited for the half-year ended 31 December 2010, I declare that to the best of my knowledge and belief, there have been: No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and No contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Minerals Corporation Limited and the entities it controlled during the period. Peter Toll Director BDO Audit (WA) Pty Ltd Perth, Western Australia BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2010 Note 2010 $ 000 Consolidated Entity 2009 $ 000 Sales of goods 161 Interest income 3 2,676 Other revenue 2 307 Total revenue 2 3,144 Deferred gain on sale and leaseback of assets 1,308 Loss on sale of investments (1,269) Changes in inventories of finished goods (179) Raw materials and consumables used (240) Employee benefits expense (1,401) Finance costs 3 (4,320) Professional fees (246) Loss on disposal of fixed asset (1) Other expenses (551) Profit (Loss) before depreciation, amortisation and income 2 (3,755) tax Depreciation and amortisation expense 3 (2,453) Profit (Loss) before income tax 2 (6,208) Income tax expense Net profit (loss) after income tax expense 2 (6,208) Other comprehensive income (1,400) Other comprehensive income for the half year net of tax (1,400) Total comprehensive profit (loss) for the half year 2 (7,608) Profit (Loss) attributable to: Owners of Minerals Corporation Limited 2 (6,043) Non controlling interests (165) 2 (6,208) Total comprehensive income for the half year attributable to: Owners of Minerals Corporation Limited 2 (7,608) Non controlling interests 2 (7,608) Basic loss per share 0.00 cents (0.16 cents) Diluted loss per share 0.00 cents (0.16 cents) This financial report should be read in conjunction with the accompanying notes. 6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 Consolidated Entity 31 Dec 2010 $ 000 30 June 2010 $ 000 CURRENT ASSETS Cash and cash equivalents 2 TOTAL CURRENT ASSETS 2 TOTAL ASSETS 2 CURRENT LIABILITIES Trade and other payables 94,143 94,143 TOTAL CURRENT LIABILITIES 94,143 94,143 TOTAL LIABILITIES 94,143 94,143 NET LIABILITIES (94,141) (94,143) EQUITY Issued capital 132,529 132,529 Accumulated losses (226,670) (226,672) Parent entity interest (94,141) (94,143) Non controlling interest TOTAL EQUITY (94,141) (94,143) This financial report should be read in conjunction with the accompanying notes. 7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2010 Consolidated entity Ordinary Share Capital Redeemable Preference Accumulated Losses Capital profit and Revaluation Reserves Noncontrolling Interests Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 01.07.2009 110,165 3,872 (116,310) 3,874 5,468 7,069 Disposal adjustment (1,400) (1,400) Net loss recognised directly in equity (1,400) (1,400) Loss attributable to members of parent entity (6,043) (165) (6,208) Total comprehensive income for the period (6,043) (1,400) (165) (7,608) Shares issued during the period 17,830 17,830 Equity raising costs (953) (953) Non controlling interest (351) (351) Balance at 31.12.2009 127,042 3,872 (122,353) 2,474 4,952 15,987 Balance at 01.07.2010 128,657 3,872 (226,672) (94,143) Profit attributable to members of parent 2 2 entity Total comprehensive income for the period 2 2 Balance at 31.12.2010 128,657 3,872 (226,670) (94,141) This financial report should be read in conjunction with the accompanying notes. 8
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2010 Consolidated Entity 2010 $ 000 2009 $ 000 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers 2 176 Payments to suppliers and employees (3,648) Interest received 27 Finance costs (1,203) Net cash used in operating activities 2 (4,648) CASH FLOWS FROM INVESTING ACTIVITIES: Payment for other financial assets (350) Proceeds from sale of investments 450 Loan to related parties (3) Net cash provided by/(used in) investing activities 97 CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of borrowings (757) Repayment of finance lease principal (67) Proceeds from issue of shares 4,008 Proceeds from borrowings 1,684 Payment for equity raising costs (24) Net cash provided by financing activities 4,844 Net increase / (decrease) in cash held 2 293 Cash at the beginning of the reporting period 49 Cash at the end of the reporting period 2 342 This financial report should be read in conjunction with the accompanying notes. 9
NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2010 NOTE 1 BASIS OF PREPARATION LIMITATIONS ON PREPARATION On 15 June 2010 the Company appointed a voluntary administrator. The administrator s appointment was to Minerals Corporation Limited and extends to a number of the subsidiary companies. In addition, a number of the subsidiary companies are incorporated in other jurisdictions and not subject to Australian Corporations Act, including the administrator s appointment. In preparing these accounts the Company has not had access to the financial records of the subsidiaries. Please refer to Note 5 for more information regarding events subsequent to reporting date. All subsidiaries were disposed of as part of the recapitalisation proposal. Basis of Preparation The half yearly consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standard AASB 134; Interim Financial Reporting, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board. It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2010 and any public announcements made by Minerals Corporation Limited and its controlled entities during the half year in accordance with the continuous disclosure requirements arising under the Corporations Act 2001. The accounting policies have been consistently applied by the entities in the consolidated group and are consistent with those in the June 2010 financial report. The half yearly report does not include full disclosure of the type normally included in an annual financial report. Reporting Basis and Conventions The half yearly report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Going Concern The statement of financial position of the Group as at 31 December 2010 discloses a net working capital deficiency of $94.141 million and a deficiency in net assets of $94.141 million. On 15 June 2010, the securities of the Company were suspended from quotation on the Official List of the ASX at the request of the Company. On the same date the directors of the Company appointed Martin Green and Glenn Miller of BRI Ferrier as Joint and Several Administrators of the Company (Administrators) pursuant to Section 436A of the Corporations Act. On 7 December 2010 a special class meeting of preference shareholders approved a variation to the terms of the preference shares. The 19,361,930 preference shares were subsequently redeemed and 19,361,930 ordinary shares were issued. The $136 paid to the preference shareholders was funded by a placement of 13,600 ordinary shares. At a general meeting of ordinary shareholders held on 19 April 2011 the shareholders approved the following: o Consolidation of capital at 1 for 10; o Issue of 75,000,000 ordinary shares at $0.0001 per share; o Issue of 250,000,000 ordinary shares at $0.01 per share; o Issue of 50,000,000 options to acquire ordinary shares at a price of $0.01 each on or before 31 December 2015. 10
On 28 April 2011 the Company lodged a prospectus for the raising of $2,508,500 before costs as part of the recapitalisation of the company. As at the date of this report the Company has completed its capital raising pursuant to the prospectus dated 28 April 2011 and received conditional approval for the reinstatement of its securities to the ASX. Upon satisfaction of those listing conditions the Company s securities will be requoted on the ASX. Accordingly, the accompanying financial statements have been prepared on a going concern basis. To the extent that the Group is not successful in gaining reinstatement to official quotation on the ASX there is a level of uncertainty as to whether the Group will be able to continue to operate as a going concern. The financial statements of the consolidated entity do not include any adjustments relating to the recoverability or classification of recorded asset amounts, or to the amounts or classification of liabilities, which might be necessary should the Group not be able to continue as a going concern. NOTE 2 DISCONTINUED OPERATIONS On 15 June 2010, the securities of the Company were suspended from quotation on the Official List of the ASX at the request of the Company. On the same date the Directors of the Company appointed Martin Green and Glenn Miller of BRI Ferrier as Joint and Several Administrators of the Company (Administrators) pursuant to Section 436A of the Corporations Act. The Company lost control of its subsidiaries during the external administration process. As a result of the administration process and the circumstances relating to the financial report, there are not adequate books and records sufficiently capable of audit or verification available to the directors to present financial information for the Company or the consolidated entity which is described in the Limitation on Preparation in Note 1 to the financial report. The Company has sufficient information to enable the accurate presentation of the statement of financial position as at 31 December 2010. NOTE 3 INCOME AND EXPENSES The following revenue and expense items are relevant in explaining the financial performance for the interim period: Consolidated Entity 31 Dec 2010 31 Dec 2009 Income items: $ 000 Interest earned from sale and lease back financing 2,676 Deferred gain on sale and leaseback of asset 1,308 Expense items: Amortisation of leased assets 1,876 Finance costs 4,320 NOTE 4 SEGMENT INFORMATION Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. The entity does not have any operating segments with discrete financial information. The Company does not have any customers, and all the Company s assets and liabilities are located within Australia. The Board of Directors review internal management reports on a monthly basis that is consistent with the information provided in the statement of comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required because the information as presented is what is used by the Board to make strategic decisions. 11
NOTE 5 EVENTS SUBSEQUENT TO REPORTING DATE Subsequent to the reporting date the following significant events occurred: On 7 December 2010 a special class meeting of preference shareholders approved a variation to the terms of the preference shares. The 19,361,930 preference shares were subsequently redeemed during January 2011 and 19,361,930 ordinary shares were issued. The $136 paid to the preference shareholders was funded by a placement of 13,600 ordinary shares. At a general meeting of ordinary shareholders held on 19 April 2011 the shareholders approved the following: o Consolidation of capital at 1 for 10; o Issue of 75,000,000 ordinary shares at $0.0001 per share; o Issue of 250,000,000 ordinary shares at $0.01 per share; o Issue of 50,000,000 options to acquire ordinary shares at a price of $0.01 each on or before 31 December 2015. On 28 April 2011 the Company lodged a prospectus for the raising of $2,508,500 before costs as part of the recapitalisation of the company. As at the date of this report the Company has completed its capital raising pursuant to the prospectus dated 28 April 2011 and received conditional approval for the reinstatement of its securities to the ASX. Upon satisfaction of those listing conditions the Company s securities will be requoted on the ASX. Other than as disclosed, there has been no matter or circumstance that has arisen that has significantly affected, or may significantly affect: 1. the consolidated entities operations in future financial years, or 2. the results of those operations in future financial years, or 3. the consolidated entities state of affairs in future financial years. 12
DIRECTORS DECLARATION The directors of the Company declare that subject to the effect of the external administration process and Note 1 and Note 2 of the financial report: 1. The financial statements and notes, as set out on pages 6 to 12: (a) comply with Accounting Standard AASB 134: Interim Financial Reporting and other mandatory professional requirements and the Corporations Regulations 2001; and (b) give a true and fair view of the consolidated entity s financial position as at 31 December 2010 and of its performance for the half year ended on that date. 2. 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, as set out in Note 1 to the accounts. This declaration is made in accordance with a resolution of the Board of Directors. Gary Steinepreis Director West Perth 1 August 2011 13
Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR S REVIEW REPORT TO THE MEMBERS OF MINERALS CORPORATION LIMITED Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Minerals Corporation Limited, which comprises the consolidated statement of financial position as at 31 December 2010, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the half-year s end or from time to time during the half-year. Directors Responsibility for the Half-Year Financial Report The directors of the disclosing entity are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 31 December 2010 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Minerals Corporation Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Minerals Corporation Limited, would be in the same terms if given to the directors as at the time of this auditor s report. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
Basis for Disclaimer of Conclusion The company and consolidated entity were placed into administration on 15 June 2010. Consequently, the financial information relating to the half-year under review was not subject to the same accounting and internal controls processes, which includes the implementation and maintenance of internal controls that are relevant to the preparation and fair presentation of the financial report. Whilst the books and records of the company and consolidated entity have been reconstructed to the maximum extent possible, we were unable to satisfy ourselves as to the completeness of the general ledger and financial records as well as the relevant disclosures in the financial report. As stated in Note 1, the Directors are unable to state that the half-year financial report is in accordance with all the requirements of the Corporations Act 2001 and the Australian Accounting Standard AASB 134 Interim Financial Reporting. Disclaimer of Conclusion Because of the significant of the matters described in the Basis for Disclaimer of Conclusion paragraph, we have not been able to obtain sufficient appropriate review evidence to provide a basis for a conclusion. Accordingly, we do not express a conclusion on the financial report. Emphasis of Matter Without qualifying our conclusion, we draw attention to Note 1 in the financial report which indicates as at 31 December 2010 the consolidated entity had a net asset deficiency of $94,141,000. This condition, along with other matters as set out in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the entity s ability to continue as a going concern and as such whether it will realise its asset and settle its liabilities in the normal course of business and at the amounts stated in the financial report. BDO Audit (WA) Pty Ltd Peter Toll Director Perth, Western Australia Dated this 1 st day of August 2011