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Discovery Metals Limited 2009 Annual report #Botswana

Discovery Metals Limited 2009 Annual report #Botswana

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    Discovery Metals Limited 2009 Annual report #Botswana Discovery Metals Limited 2009 Annual report #Botswana Document Transcript

    • Grade Increasing as Resource Grows Copper Demand Exceeds Known Supply
    • Market Cap and Enterprise Value Significant Shareholders – June 09 Shares on Issue at 30-June-09 194.1m Macquarie Bank 14.4% Share Price at 30 June-09 A$0.25 Taurus Fund 13.1% Market Cap A$48.5m Resource Capital Funds 10.9% Net Cash at 30 June-09 A$8.7m Investec (Botswana) 8.0% Enterprise value A$39.8m BIFM (Botswana) 5.5% Trafigura 4.6%
    • Discovery Metals Limited Financial Report 2009 ABN: 29 104 924 423 DISCOVERY METALS LIMITED ABN 29 104 924 423 DIRECTORS REPORT and FINANCIAL REPORT 2009 For The Year Ended 30 June 2009 Dollar figures refer to Australian dollars unless otherwise stated.
    • Discovery Metals Limited Financial Report 2009 Page 2 ABN: 29 104 924 423 CONTENTS Page Directors Report 3 Income Statement 14 Balance Sheet 15 Statement of Changes in Equity 16 Cash Flow Statement 17 Notes to the Financial Statements 18 ASX Information 46 Directors’ Declaration 48 Auditors Independence Declaration 49 Independent Audit Report 50 Corporate Governance 52
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 3 ABN: 29 104 924 423 Your directors present their report on Discovery Metals Limited and its subsidiaries (‘Consolidated Group’) for the year ended 30 June 2009. THE BOARD OF DIRECTORS The directors of Discovery Metals Limited (‘Company’ or ‘Discovery Metals’) in office at any time during or since the end of the year are: GORDON GALT (Date of Appointment 09.05.07) B.Eng (Hons), B Comm, Grad Dip Applied Finance, MAusIMM, MAICD Chairman and member of the Audit and Financial Risk Committee Gordon Galt is a senior mineral resources executive and an experienced director with international mineral industry experience. During his career, Mr Galt has worked in senior management, technical and operational roles across a wide range of commodities, primarily in gold, coal, magnesium and copper/lead/zinc. Mr Galt is by training, a mining engineer, with post-graduate qualifications in finance. Both degrees are from the University of Queensland. During the past ten years Mr Galt has worked mainly as the managing director of companies engaged in the development and operation of large resource projects and he has also spent a period of time in banking. Mr Galt is currently engaged in funds management and corporate advisory work. In previous roles, Mr Galt has demonstrated a track record of creating shareholder value through analysis of a Company's strategic position, followed by implementation of appropriate corporate strategies, fund raising and motivating teams of senior resource professionals. During the past three years, Mr Galt has held the following listed company directorships:  Aquila Resources Limited from August 2007 to present  Navigator Resources Limited from August 2008 to present  Gloucester Coal Limited from April 2004 to August 2007  Magnesium International Limited from August 2002 to January 2006 STUART BRADLEY SAMPSON (Date of Appointment 01.02.08) B. Eng (Hon), MBA, AMP Oxf, MAusIMM, MAICD Managing Director Brad Sampson has over 20 years Australian and International experience as a mining engineer. He has worked extensively in open cut and underground mine operations and developments in Southern Africa, Australia and the Pacific. He previously held an executive role in Thiess Ltd and has been in general management roles with Gold Fields Limited at St Ives gold mine in Western Australia and at the Kloof operation in South Africa. He has also held the position of General Manager-PNG for Emperor Mines Limited. Brad has also held positions with Anglo American, Ross Mining NL and Comalco. Mr Sampson is also the managing director of all Discovery Metals subsidiaries registered in Botswana. MORRICE CORDINER (Date of Appointment 30.05.03) LLB, ASIA Non-Executive Director and Chairman of the Audit and Financial Risk Committee Mr Cordiner is a corporate lawyer by training and has in excess of 15 years experience in the finance and resources industries. Based in Sydney, Australia, he is a founding Director of Discovery Metals and was instrumental in identifying the original projects and strategic alliance with Falconbridge Inc that formed the original assets of the Company in 2003. Over the last 6 years, Mr Cordiner has been involved in the successful development and financing of a number of junior listed resource companies with projects in gold, nickel, copper and zinc. He has been actively involved in raising funds for these ventures on the Australian Stock Exchange, the London AIM market and the Toronto Stock Exchange. Mr Cordiner is also currently a non- executive director of the ASX and TSX dual-listed gold explorer, Andean Resources Limited (Dec 2003 to present) and the ASX listed zinc explorer, Meridian Minerals Limited (July 2008 to present).
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 4 ABN: 29 104 924 423 RIBSON GABONOWE (Date of Appointment 30.05.08) BSc (Mining Engineering), MSc (Mineral Economics), MBA Non Executive Director Ribson Gabonowe is a well known Mining Engineer with over 25 years of experience in the mining industry. For twelve years to December 2006, Ribson was the Director of Mines of Botswana, responsible for administering the legal and fiscal framework governing mineral exploitation. In this role, Ribson was involved in negotiations of mineral agreements for copper, nickel, diamonds, coal and soda ash. During the past five years Ribson held directorships in the following companies:  Morupule Colliery (Pty) Ltd  Botswana Diamond Valuing Company (Pty) Ltd  BCL Limited (Pty) Ltd Ribson is currently a director of Kukama Mining and Exploration, African Coal (Pty) Ltd, Atlas Minerals (Pty) Ltd and Gabor Consulting (Pty) Ltd. Mr Gabonowe is also a director of all Discovery Metals subsidiaries registered in Botswana. JEREMY READ (Date of Appointment 01.02.08) BSc (Hons), MAusIMM Non Executive Director (Managing Director 01.07.07 to 01.02.08) Jeremy Read has 22 years domestic and international minerals exploration experience and was previously the Manager of BHP Minerals Australian Exploration Team. He has extensive exploration experience for gold, nickel sulphides and base metals. Mr. Read played a critical role in the discovery of the Kabanga North Nickel deposit in Tanzania which is currently undergoing feasibility studies . He is skilled in developing new technical teams, management of technical/specialist service groups, project generation activities, risk management, multi-commodity mineral exploration, company listings and capital raisings. During his employment with BHP, Mr Read participated in the development of several significant strategic exploration alliances. Mr Read was the founding managing director of Discovery Metals from its incorporation in May 2003, until his appointment as a non-executive director on 1 February 2008. He is also the founding managing director of Meridian Minerals Limited. JOHN SHAW (Date of Appointment 13.11.06) BSc (Geological Engineering), FAusImm, MCIM, FAICD, SME Non Executive Director and member of the Audit and Financial Risk Committee John Shaw has over 40 years experience in exploration, development and operations of open cut and underground mines. He previously was Vice President of the Australian Operations of Placer Dome Asia Pacific Limited and Managing Director of Kidston Gold Mines. Mr Shaw is a former Chairman of Gallery Gold Limited, Zimbabwe Platinum Mines Limited, Tri Origin Minerals Limited, Albidon Limited and Lodestone Exploration Limited. He was also involved with the development of the Mupane Gold Mine in NE Botswana. Mr Shaw is a non executive director of IAMGOLD Corporation and Quadra Australia Pty Ltd. During the past five years Mr Shaw has held the following listed company directorships:  IAMGOLD Corporation from March 2006 to present  Albidon Limited February 2008 to April 2009  Tri Origin Minerals Limited from October 2003 to February 2008  Lodestone Exploration Limited from May 2002 to November 2007  Gallery Gold Limited from November 2003 to March 2006  Kingsgate Consolidated Limited from September 2000 to March 2005
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 5 ABN: 29 104 924 423 ROSLYNN SHAND (Date of Appointment 24.05.07) BA, LLB, FCIS Company Secretary Roslynn Shand has a combined degree in Arts/Law from the University of Queensland, is a fellow of the Chartered Secretaries Australia and has considerable experience in the company secretarial area. She has been a company secretary for over 15 years for entities in the financial, agricultural and mining sectors. Principal Activity The principal activity of the Company during the year was mineral exploration and in particular the continued development of its Boseto copper project in Botswana. No significant change in the nature of the Consolidated Group’s principal activity occurred during the year. Dividends Paid or Recommended The directors do not recommend the payment of a dividend for this financial year. No dividend has been declared or paid by Discovery Metals Limited since the end of the previous financial year. Operating Results The result of the Consolidated Group amounted to an after-tax loss of $4,436,900 (2008: loss $3,610,890). Number of Employees There are twenty eight (28) full-time employees employed by the Consolidated Group in Australia and Botswana. All other roles are currently undertaken under contract arrangements, or by part-time employees. Significant Changes in State of Affairs No significant changes in the state of affairs of the Consolidated Group occurred during the year. After Balance Date Events No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Consolidated Group, the results of those operations or the state of affairs of the Consolidated Group in future financial years other than those noted in Note 25 in the Notes to the Financial Statements. Future Developments Other than as referred to in this report, further information as to likely developments in the operations of the Consolidated Group and the expected results of those operations would, in the opinion of the directors, be speculative and not in the best interests of the Consolidated Group. Review of Operations The directors continued to operate the Consolidated Group in the best interests of the shareholders. Financial Position The net asset position of the Consolidated Group at 30 June 2009 was $30,978,963 (30 June 2008: $17,288,514). The Consolidated Group has written off $700,000 (30 June 2008 : $49,990) on exploration during the half year. The farmed out Australian prospects of Litchfield and Musgrave have been written down to nil value as, given the current market, realisation of a mining operation in the foreseeable future is considered unlikely. Exploration expenditure of $49,990 in relation to the Cat Camp prospect was written off in June 2008, following a decision to relinquish that tenement.
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 6 ABN: 29 104 924 423 Tenement Schedule The Consolidated Group has an interest in the following tenements: PROJECT TENEMENT MANAGER AREA (Km2 ) GRANTED EXPIRY EXPENDITURE COMMITMENT COUNTRY or STATE DIKOLOTI NICKEL P019/2004 Discovery 284 1-Jul-07 30-Jun-11 BWP 4.497m Yr 6 BWP 2.210m Yr 7 BOTSWANA DIKOLOTI NICKEL P020/2004 Discovery 89.6 1-Jul-07 30-Jun-11 BWP 0.482m Yr 6 BWP 2.210m Yr 7 BOTSWANA DIKOLOTI NICKEL P021/2004 Discovery 40.7 1-Jul-07 30-Jun-11 BWP 0.226m Yr 6 BWP 2.210m Yr 7 BOTSWANA DIKOLOTI NICKEL P022/2004 Discovery 197.4 1-Jul-07 30-Jun-11 BWP 1.048m Yr 6 BWP 2.210m Yr 7 BOTSWANA BOSETO COPPER P98/2005 Discovery 630 1-Oct-05 30-Sep-10 BWP 0.1m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER P99/2005 Discovery 893 1-Oct-05 30-Sep-10 BWP 4.0m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER P100/2005 Discovery 757 1-Oct-05 30-Sep-10 BWP 0.1m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER P101/2005 Discovery 426 1-Oct-05 30-Sep-10 BWP 0.1m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER P102/2005 Discovery 557 1-Oct-05 30-Sep-10 BWP 0.1m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER P103/2005 Discovery 463 1-Oct-05 30-Sep-10 BWP 0.1m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER P104/2005 Discovery 731 1-Oct-05 30-Sep-10 BWP 0.1m Yr 4 BWP 0.5m Yr 5 BOTSWANA BOSETO COPPER 186/2008 Discovery 929 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA BOSETO COPPER 187/2008 Discovery 951 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA BOSETO COPPER 188/2008 Discovery 940 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA BOSETO COPPER 189/2008 Discovery 444 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA BOSETO COPPER 190/2008 Discovery 861 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA BOSETO COPPER 191/2008 Discovery 944 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA BOSETO COPPER 192/2008 Discovery 638 1-July-08 30-June-11 BWP 0.1m Yr 1 BWP 0.2m Yr 2 BWP 0.3m Yr 3 BOTSWANA MUSGRAVE E69/1640 Redstone 48 01-Feb-01 31-Jan-10 $144,000 WA MUSGRAVE E69/1642 Redstone 30 01-Feb-01 31-Jan-10 $90,000 WA MUSGRAVE E69/1662 Redstone 59 08-Oct-03 07-Oct-10 $118,000 WA MUSGRAVE E69/1663 Redstone 54 28-Feb-01 27-Feb-10 $162,000 WA LITCHFIELD EL 22959 Pacific Ore 10 17-Feb-03 16-Feb-09 All the Litchfield tenements are in the process of being relinquished. No expenditure is committed. NT LITCHFIELD EL 22960 Pacific Ore 14 NT LITCHFIELD EL 22961 Pacific Ore 111 11-Jul-03 10-Jul-09 NT LITCHFIELD EL 23619 Pacific Ore 84 22-Oct-03 21-Oct-09 NT LITCHFIELD EL 23623 Pacific Ore 20 NT BWP – The Botswana Pula exchange rate is approximately BWP 5.5 to AUD 1.00
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 7 ABN: 29 104 924 423 REMUNERATION REPORT This report details the nature and amount of remuneration for each key management personnel (being directors and executives receiving the highest remuneration) of Discovery Metals Limited. Remuneration policy The remuneration policy of Discovery Metals has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component combined with specific long term incentives, based on key performance areas affecting the Consolidated Group’s financial results. Short-term incentives will be introduced once the Company is producing revenue from operations. The board of Discovery Metals believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Consolidated Group, as well as create goal congruence between directors, executives and shareholders. Following a review by the board of its committee structure, the board chose to retain directly all responsibility for remuneration matters. A separate remuneration committee was deemed not to be required at this stage. The board’s policy for determining the nature and amount of remuneration for key management personnel of the Consolidated Group is as follows:  All key management personnel receive a base salary (which is based on factors such as demonstrated skills and experience), superannuation, fringe benefits and a share options package. Short term performance incentives will be added in future years.  The board reviews key management personnel packages annually by reference to the Consolidated Group’s performance, executive performance and comparable information from industry sectors.  The remuneration structure for key management personnel is based on a number of factors, including skills displayed, particular experience of the individual concerned and overall performance of the Company. The contracts for service between the Company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement, key management personnel are paid employee benefit entitlements accrued to date of retirement. Executives are paid a percentage of between three and twelve months of their salary in the event of termination, with all granted options vesting immediately in the event of a takeover bid for the Company. Any options not exercised within 60 days of the date of termination lapse.  For executives, the group will seek to emphasise payment for results through providing various cash bonus reward schemes, specifically, the incorporation of incentive payments based on the achievement of revenue targets and return on equity ratios. This will be implemented once the Company commences production in future years. The performance of executives is measured against criteria agreed quarterly with the managing director and discussed annually by the board. The criteria are based predominantly on the work required to grow the Company and to bring the Boseto copper project into production and therefore add to shareholders’ value. As the Company is in the exploration and feasibility phase, currently no short term bonus payment scheme is applicable to executives. Any future bonuses and incentives will be linked to predetermined performance criteria. The board may however, exercise its discretion in relation to approving incentives, bonuses and options and make changes. Any such changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are entitled to participate in the Company’s option plan, which is the long term incentive portion of their remuneration.
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 8 ABN: 29 104 924 423 The key management personnel receive a superannuation guarantee contribution required by the Australian government, which is currently 9%, and do not receive any other retirement benefits. Botswana key management personnel receive a similar superannuation contribution payment. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to key management personnel is valued at the cost to the Company and expensed during the year of the payment, or in the case of share options, in the year of the grant. Options are valued using the Black-Scholes methodology. The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders. Fees for non-executive directors are not linked to the performance of the Consolidated Group. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the directors’ option plan. Performance-based remuneration The Company currently has no performance based remuneration component built into director and executive remuneration packages. Company performance, shareholder wealth and director and executive remuneration The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. This has been achieved by allocating share options to directors and key management upon commencement and based on the VWAP of the Company’s share price in the period before the director or executive commenced with the Company. Managing Director and Executives The employment conditions of the managing director, Stuart Bradley (Brad) Sampson and other key executives are formalised in contracts of employment. The managing director and other executives are permanent employees of Discovery Metals group companies. Brad Sampson is employed under a fixed three (3) year contract, which commenced on 1 February, 2008 and expires on 31 January 2011. The employment contract stipulates a six (6) month resignation period. The Company may terminate the employment contract without cause by providing twelve (12) months written notice or making payment in lieu of notice, based on the individual's annual salary. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time. Any options not exercised within 60 days of the date of termination will lapse. The board determines the proportion of fixed and variable compensation for each executive.
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 9 ABN: 29 104 924 423 Key Management Personnel Remuneration 2009 Short term benefits Post employment benefits Share based Name Cash Salary & Fees Non- Monetary Benefits Super- annuation Other Share Options Total $ $ $ $ $ $ Non- Executive Directors Gordon Galt 80,000 7,200 87,200 Morrice Cordiner (1) 44,160 5,993 50,153 Ribson Gabonowe (2) 44,160 33,000 77,160 Jeremy Read 40,000 3,600 33,000 76,600 John Shaw 0 43,600 43,600 Executive Directors Brad Sampson 353,211 31,789 225,154 610,154 Other key management personnel Paul Fulton 240,000 21,600 330,038 591,638 Ross Gibbins (3) 146,667 13,200 58,320 218,187 Christian Heili (4) 200,000 35,678 18,000 125,812 379,490 Fred Nhiwatiwa (4) 150,000 27,600 15,000 41,075 233,675 Notes: Cash Bonuses are not payable until production commences and therefore 0% of directors and key management remuneration is related to performance. Long service leave is not accrued until 5 years service has been reached. Share Options are valued using the Black-Scholes methodology. (1) Mr Cordiner's director's fees are paid to Mining Investors Australia Pty Limited in accordance with his contract. Mining Investors were paid $5,993 for consulting services associated with a capital placement. (2) Mr Gabonowe's director's fees are paid to Gabor Consulting (Pty) Ltd in accordance with his contract. (3) Mr Gibbins commenced employment on 1 November 2008. (4) Botswana based key executive personnel are provided with housing, a car and medical and life insurance as part of their employment contracts.
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 10 ABN: 29 104 924 423 Key Management Personnel Remuneration 2008 Short term benefits Post employment benefits Share based Name Cash Salary & Fees Non- Monetary Benefits Super- annuation Other Share Options Total $ $ $ $ $ $ Non- Executive Directors Gordon Galt 80,000 7,200 412,000 499,200 Morrice Cordiner (1) 44,160 44,160 Ribson Gabonowe (2) 6,667 (Note 7) 6,667 Jeremy Read (3) 15,026 1,352 (Note 7) 16,378 John Shaw 40,000 3,600 43,600 Executive Directors Jeremy Read (4) 148,210 22,789 105,000 275,999 Brad Sampson (5) 234,671 13,245 (Note 7) 247,916 Other key management personnel Paul Fulton 64,615 5,815 43,507 113,937 Christian Heili (6) 122,727 20,328 13,500 5,627 70,870 233,052 Quinton Hills 139,583 12,563 152,146 Fred Nhiwatiwa (6) 115,768 19,967 13,500 105,000 254,235 Notes: Cash Bonuses are not payable until production commences and therefore 0% of directors and key management remuneration is related to performance. Long service leave is not accrued until 5 years service has been reached. Share Options are valued using the Black-Scholes methodology. (1) Mr Cordiner's director's fees are paid to Mining Investors Australia Pty Limited in accordance with his contract. (2) Mr Gabonowe's director's fees are paid to Gabor Consulting (Pty) Ltd. Mr Gabonowe was appointed 30 April 2008. (3) Mr Read relinquished his role as Managing Director on 1 February 2008 and was appointed as a Non- Executive Director on 1 February 2008 (4) Mr Read received a termination payment of $105,000 in accordance with his employment contract as managing director. (5) Mr Sampson was paid $87,500 on commencement as managing director with the Company on 1 February 2008 in accordance with his employment contract. (6) Botswana based key executive personnel are provided with housing, a car and medical insurance as part of their employment contracts. (7) Shares option grants of 1 million shares each for incoming non-executive directors Ribson Gabonowe and Jeremy Read and 2 million for incoming managing director Brad Sampson are to be issued subject to shareholder approval.
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 11 ABN: 29 104 924 423 Options issued as part of remuneration for the year ended 30 June 2009 Options are issued to directors and executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to the majority of directors and executives of Discovery Metals Limited and its subsidiaries to increase goal congruence between executives, directors and shareholders. Options Granted as Remuneration (current year) Terms & Conditions for Each Grant Vested No. Granted No. Grant Date Value per Option at Grant Date $ Exercise Price $ First Exercise Date Last Exercise Date Non- Executive Directors Jeremy Read 1,000,000 1,000,000 12/12/08 33,000 $0.50 12/12/08 12/12/11 Ribson Gabonowe 1,000,000 1,000,000 12/12/08 33,000 $0.50 12/12/08 12/12/11 Executive Directors Brad Sampson 1,000,000 1,000,000 12/12/08 37,000 $0.44 01/02/09 01/02/12 Brad Sampson 1,000,000 12/12/08 44,000 $0.55 01/02/10 01/02/13 Brad Sampson 1,000,000 1,000,000 12/12/08 167,100 $0.35 12/12/08 01/11/13 Other key management personnel Paul Fulton 500,000 500,000 29/04/09 83,600 $0.375 29/04/09 01/11/13 Ross Gibbins 250,000 31/12/08 19,500 $0.26 1/11/09 01/11/12 Ross Gibbins 250,000 31/12/08 21,000 $0.32 1/11/10 01/11/13 Ross Gibbins 250,000 250,000 30/06/09 21,000 $0.375 30/06/09 01/11/13 Christian Heili 250,000 250,000 30/06/09 21,000 $0.375 30/06/09 01/11/13 Fred Nhiwatiwa 250,000 250,000 30/06/09 21,000 $0.375 30/06/09 01/11/13
    • DIRECTORS REPORT  Discovery Metals Limited Financial Report 2009    Page 12  ABN: 29 104 924 423  Shares Issued on Exercise of Compensation Options  Options exercised during the year that were granted as compensation in prior periods.    No. of  Ordinary  Shares Issued Amount Paid  per Share  Amount  Unpaid per  Share  Other key management personnel        Quinton Hills  500,000  30 cents  0    Options value as a portion of total remuneration    Options  Granted as  Part of  Remuneration $  Total  Remuneration  Represented  by Options %  Options  Exercised  $  Options  Lapsed  ($)  Non‐ Executive Directors           Gordon Galt  0  0%  0  0  Morrice Cordiner    0  0%  0  79,000  Ribson Gabonowe   33,000  43%  0  0  Jeremy Read    33,000  43%  0  118,500  John Shaw  0  0%  0  0            Executive Directors           Brad Sampson   225,154  37%  0  0            Other key management personnel        Paul Fulton  330,038  56%  0  0  Ross Gibbins  58,320  27%      Christian Heili  125,812  33%  0  0  Fred Nhiwatiwa  41,075  18%  0  0    Meetings of Directors  During the financial year, twelve (12) meetings of directors were held.  Attendances by each director during the  year were as follows:    Directors’ Meetings    Number eligible to attend  Number attended  Non‐ Executive Directors      Gordon Galt  12  12  Morrice Cordiner    12  10  Ribson Gabonowe   12  10  Jeremy Read    12  11  John Shaw  12  12  Executive Directors       Brad Sampson   12  12    As well as formal meetings of directors, executive and non‐executive directors are in frequent communication  by way of telephone.   
    • DIRECTORS REPORT Discovery Metals Limited Financial Report 2009 Page 13 ABN: 29 104 924 423 Indemnifying Officers The Company has agreed to indemnify the Directors and Officers of the Company against all liabilities to another person (other than the Company) that may arise from their position as Directors and Officers of the Company. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. The liabilities insured include legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. A premium has been paid to cover Directors and Officers of the Consolidated Group. Options At 30 June 2009 there were 35,660,569 (2008: 10,015,525) unissued ordinary shares of Discovery Metals Limited for which options were outstanding as detailed at Note 17 of the Financial Statements. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Non-audit Services The board of directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:  all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and  the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. There were no fees for non-audit services paid or payable to the external auditors during the year ended 30 June 2009. Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2009 has been received and can be found on page 49 of this combined report. Signed in accordance with a resolution of the Board of Directors. Brad Sampson Gordon Galt Managing Director Chairman Brisbane. Dated this fifteenth day of September, 2009
    • INCOME STATEMENT For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 14 ABN: 29 104 924 423 CONSOLIDATED GROUP PARENT ENTITY Note 2009 $ 2008 $ 2009 $ 2008 $ Revenues 3 553,065 817,612 1,478,530 1,486,024 Compliance expenses (754,717) (819,256) (1,030,977) (645,952) Depreciation and amortisation 10 (69,463) (70,230) (13,092) (22,853) Exploration expenditure written off 11 (700,000) (49,990) (700,000) (49,990) Legal expenses (188,659) (116,625) (183,518) (116,043) Rent (168,527) (140,506) (131,598) (107,140) Salaries and consultants (1,520,237) (1,549,007) (1,313,729) (1,470,359) Travel expenses (287,467) (141,055) (266,224) (122,542) Share based payments (895,480) (1,171,360) (854,405) (1,066,360) Interest expenses (32) (433) (32) - Gain/(Loss) on foreign currency (383) 22,612 (383) - Other expenses (405,000) (392,652) (218,461) (166,266) Profit/(loss) before income tax expense (4,436,900) (3,610,890) (3,233,889) (2,281,481) Income tax expense 5 0 0 0 0 Profit/(loss) attributable to members of the Consolidated Group (4,436,900) (3,610,890) (3,233,889) (2,281,481) Basic earnings per share (cents per share) 7 (3.07) (2.98) Diluted earnings per share (cents per share) 7 (3.07) (2.98) The accompanying notes form part of these financial statements
    • BALANCE SHEET As At 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 15 ABN: 29 104 924 423 CONSOLIDATED GROUP PARENT ENTITY ASSETS Note 2009 $ 2008 $ 2009 $ 2008 $ CURRENT ASSETS Cash & cash equivalents 8 8,732,079 5,526,526 5,934,808 5,442,948 Trade & other receivables 9 435,999 393,411 166,663 129,477 TOTAL CURRENT ASSETS 9,168,078 5,919,937 6,101,471 5,572,425 NON-CURRENT ASSETS Plant and equipment 10 511,864 426,366 19,685 16,778 Exploration expenditure 11 22,828,658 12,273,715 - 700,000 Other financial assets 12 - - 28,306,852 576 Related party loans 13 - - - 14,498,883 Intangible assets 14 - 481 - 481 TOTAL NON-CURRENT ASSETS 23,340,523 12,700,562 28,326,537 15,216,718 TOTAL ASSETS 32,508,601 18,620,499 34,428,008 20,789,143 CURRENT LIABILITIES Trade & other payables 15 1,372,269 1,308,696 370,502 246,436 Short-term provisions 16 157,369 23,289 85,163 23,289 TOTAL CURRENT LIABILITIES 1,529,638 1,331,985 455,665 269,725 TOTAL LIABILITIES 1,529,638 1,331,985 455,665 269,725 NET ASSETS 30,978,963 17,288,514 33,972,343 20,519,418 EQUITY Issued capital 17 43,696,900 27,864,491 43,696,900 27,864,491 Reserves 18 3,201,966 907,026 2,568,956 1,714,551 Accumulated losses 19 (15,919,903) (11,483,003) (12,293,513) (9,059,624) TOTAL EQUITY 30,978,963 17,288,514 33,972,343 20,519,418 The accompanying notes form part of these financial statements
    • STATEMENT OF CHANGES IN EQUITY For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 16 ABN: 29 104 924 423 CONSOLIDATED GROUP Issued Share Capital Accumulated (Losses) Option Reserve Foreign Currency Translation Reserve Total 2008 $ $ $ $ $ Balance at 30 June 2007 (as reported prior year) 16,564,837 (11,379,788) 648,191 206,445 6,039,685 Prior period adjustment (refer Note 32) 3,507,675 - (388,112) 3,119,563 Restated Balance at 1 July 2007 16,564,837 (7,872,113) 648,191 (181,667) 9,159,248 Currency Translation Differences - - - 435,987 435,987 (Loss) for the year(refer Note 32) - (3,610,890) - - (3,610,890) Prior period adjustment 2008(refer Note 32) - - (1,166,845) (1,166,845) Shares issued during the year 11,948,185 - - - 11,948,185 Transaction costs for shares issued (648,531) - - - (648,531) Cost of share based payments - - 1,171,360 - 1,171,360 Restated Balance at 30 June 2008 27,864,491 (11,483,003) 1,819,551 (912,525) 17,288,514 2009 Currency Translation Differences 1,399,460 1,399,460 (Loss) for the year (4,436,900) (4,436,900) Shares issued during the year 16,257,115 16,257,115 Transaction costs for shares issued (424,706) (424,706) Cost of share based payments 895,480 895,480 Balance as at 30 June 2009 43,696,900 (15,919,903) 2,715,031 486,935 30,978,963 PARENT ENTITY 2008 Balance at 30 June 2007 (as reported prior year) 16,564,837 (9,897,706) 648,191 0 7,315,322 Prior period adjustment (refer Note 32) 3,119,563 - - 3,119,563 Restated Balance at 1 July 2007 16,564,837 (6,778,143) 648,191 0 10,434,885 (Loss) for the year - (2,281,481) - - (2,281,481) Shares issued during the year 11,948,185 - - - 11,948,185 Transaction costs for shares issued (648,531) - - - (648,531) Cost of share based payments - - 1,066,360 - 1,066,360 Restated Balance at 30 June 2008 27,864,491 (9,059,624) 1,714,551 0 20,519,418 2009 (Loss) for the year (3,233,889) (3,233,889) Shares issued during the year 16,257,115 16,257,115 Transaction costs for shares issued (424,706) (424,706) Cost of share based payments 854,405 854,405 Balance as at 30 June 2009 43,696,900 (12,293,513) 2,568,956 0 33,972,343
    • CASH FLOW STATEMENT For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 17 ABN: 29 104 924 423 CONSOLIDATED GROUP PARENT ENTITY Note 2009 $ 2008 $ 2009 $ 2008 $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers - - GST receipts 118,635 169,914 118,635 169,914 Payments to suppliers and employees (3,241,786) (3,196,360) (1,914,771) (2,778,070) Interest received 545,206 552,784 270,671 1,276,879 Interest paid (32) (1,336) (32) (903) Refunds received 7,859 14,735 7,859 14,735 Net cash used in operating activities 26 (2,570,118) (2,460,263) (1,517,638) (1,317,445) CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration (11,254,943) (5,391,136) 0 - Purchase of plant and equipment (201,255) (417,341) (15,518) (11,424) Investment in subsidiary companies - - (13,807,393) - Proceeds from disposal of assets - 359,370 - 359,370 Proceeds from sale of investments - - - - Net cash used in investing activities (11,456,198) (5,449,107) (13,822,911) 347,946 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 16,257,115 11,948,185 16,257,115 11,948,185 Share Issue costs (424,706) (648,531) (424,706) (648,531) Loans made to subsidiary companies - - 0 (7,431,658) Net cash provided by financing activities 15,832,409 11,299,654 15,832,409 3,867,996 Net increase (decrease) in cash held 1,806,093 3,990,284 491,860 2,898,497 Cash at the beginning of the period 5,526,526 2,867,100 5,442,948 2,544,451 Effect of exchange rates 1,399,460 (730,858) - - Cash at the end of the period 8 8,732,079 5,526,526 5,934,808 5,442,948 The accompanying notes form part of these financial statements
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 18 ABN: 29 104 924 423 Contents NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES............................................................................................ 19 NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS ........................................................................................... 26 NOTE 3: REVENUE..................................................................................................................................................... 27 NOTE 4: PROFIT/(LOSS) FOR THE YEAR .......................................................................................................................... 27 NOTE 5: INCOME TAX EXPENSE.................................................................................................................................... 28 NOTE 6: INTERESTS OF KEY MANAGEMENT PERSONNEL.................................................................................................... 28 NOTE 7: EARNINGS PER SHARE .................................................................................................................................... 30 NOTE 8: CASH & CASH EQUIVALENTS ........................................................................................................................... 31 NOTE 9: TRADE & OTHER RECEIVABLES......................................................................................................................... 31 NOTE 10: PLANT AND EQUIPMENT............................................................................................................................... 31 NOTE 11: EXPLORATION............................................................................................................................................. 32 NOTE 12: OTHER FINANCIAL ASSETS............................................................................................................................. 33 NOTE 13: RELATED PARTY LOANS ................................................................................................................................ 33 NOTE 14: INTANGIBLE ASSETS..................................................................................................................................... 33 NOTE 15: TRADE AND OTHER PAYABLES........................................................................................................................ 34 NOTE 16: PROVISIONS ............................................................................................................................................... 34 NOTE 17: ISSUED CAPITAL .......................................................................................................................................... 34 NOTE 18: RESERVES .................................................................................................................................................. 36 NOTE 19: ACCUMULATED LOSSES ................................................................................................................................ 36 NOTE 20: CONTINGENT LIABILITIES............................................................................................................................... 36 NOTE 21: COMMITMENTS .......................................................................................................................................... 37 NOTE 22: SEGMENT REPORTING.................................................................................................................................. 37 NOTE 23: RELATED PARTY TRANSACTIONS..................................................................................................................... 37 NOTE 24: SHARE BASED PAYMENTS ............................................................................................................................. 38 NOTE 25: EVENTS SUBSEQUENT TO REPORTING DATE...................................................................................................... 39 NOTE 26: CASH FLOW INFORMATION ........................................................................................................................... 39 NOTE 27: FINANCIAL RISK MANAGEMENT ..................................................................................................................... 39 NOTE 28: CHANGE IN ACCOUNTING STANDARDS ............................................................................................................ 41 NOTE 29: CONTROLLED ENTITIES ................................................................................................................................. 44 NOTE 30: EXCHANGE RATES ....................................................................................................................................... 44 NOTE 31: COMPANY DETAILS...................................................................................................................................... 44 NOTE 32: CHANGES IN ACCOUNTING ESTIMATES AND ERRORS IN PRIOR PERIODS.................................................................. 44
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 19 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES This financial report includes the consolidated financial statements and notes of Discovery Metals Limited and controlled entities (‘Consolidated Group’), and the separate financial statements and notes of Discovery Metals Limited as an individual parent entity (‘Parent Entity’). The following is a summary of the significant accounting policies adopted by the Company in the preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated. Basis of Preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and liabilities. (a) Principles of Consolidation A controlled entity is any entity over which Discovery Metals Limited has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. A list of controlled entities is contained in Note 29 to the financial statements. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (or left) the Consolidated Group during the year, their operating results have been included (or excluded) from the date control was obtained (or ceased). All inter-group balances and transactions between entities in the Consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. (b) Exploration and Development Expenditure Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 20 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. (c) Going Concern The accounts have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and liabilities in the normal course of business. The Consolidated Group recorded a loss of $4,436,900 for the year ended 30 June 2009 (2008 $3,610,890). The loss is due to the accounting policy of expensing costs not directly attributable to the exploration of mineral assets. The Consolidated Group had cash assets of $8,732,079 at 30 June 2009. The Consolidated Group’s budgeted expenditure for the next financial year is approximately $12 million. The Directors acknowledge that, as in prior accounting periods, to continue the exploration and development of the Consolidated Group’s mineral exploration projects according to its business plan, including the undertaking of bankable feasibility studies, the budgeted cash outflows from operating and investing activities for the current financial year, will necessitate further capital raisings. The company remains dependent on its ability to raise funding in volatile capital markets. However, the Directors continue to believe that the going concern basis of accounting by the Parent Entity and Consolidated Group is appropriate for the following reasons:  The Company and Consolidated Group have successfully completed capital raisings during the year to 30 June 2009, notwithstanding some of the most challenging conditions in equity markets brought about by the GFC (as disclosed in Note 17). The Company has the ability to continue to raise additional funds on a timely basis, pursuant to the Corporations Act 2001, as is budgeted to occur in the 30 June 2010 financial year, as discussed above;  Share options on issue at balance date (with further options to be issued following the annual general meeting in November 2009) and exercisable by May 2010, the exercise price of which is below the Company’s current share price, would if exercised raise $9.8 million of additional capital for the Company, which it is budgeting to occur;  The Company and Consolidated Group have net current assets of $5.6 million and $7.7 million respectively at balance date and tenement expenditure commitments of $2.3 million as disclosed in Note 21 and retain the ability to scale down their operations to conserve cash, in the event that the capital raisings are delayed or partial;  The Company retains the ability, if required, to wholly or in part, dispose of interests in mineral exploration and development assets. In consideration of the above matters, the Directors have determined that it is reasonably foreseeable that the Company and Consolidated Group will continue as going concerns and that it is appropriate that the going concern method of accounting be adopted in the preparation of the financial statements. In the event that the Consolidated Group is unable to continue as a going concern (due to an inability to raise future funding requirements), it may be required to realise its assets at amounts different to those currently recognised, settle liabilities other than in the ordinary course of business and make provisions for other costs which may arise as a result of cessation or curtailment of normal business operations. Accordingly, the financial statements do not include adjustments relating to the recoverability and classification of asset amounts or to the amounts and classification of liabilities that might be necessary if the Company and Consolidated Group do not continue as going concerns.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 21 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Impairment of Assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (e) Plant and Equipment and Other Depreciable Assets Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the Consolidated Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Consolidated Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Asset Depreciation Rate Plant and equipment Leasehold improvements Intangible assets 25% - 33% 25% 33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (f) Income Tax The charge for current income tax expense is based on the profit for the year adjusted for any non- assessable or non deductible items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to, or recovered from, the relevant taxation authority. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 22 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. (g) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement. Group companies The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:  assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;  income and expenses are translated at average exchange rates for the period; and  retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 23 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of six months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. (i) Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods. Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established. All revenue is stated net of the amount of goods and services tax (GST). (j) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (k) Equity settled compensation The group operates equity-settled option schemes for key management (directors and executive staff). The fair value of the equity to which key management become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black–Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. (l) Employee Benefits Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Those cash flows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. (m) Issued Capital Ordinary issued share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in share proceeds received.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 24 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Trade and Other Payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis. (o) Joint Ventures The Consolidated Group’s interests in joint venture entities are brought to account using the equity method of accounting in the consolidated financial statements. The parent entity’s interests in joint venture entities are brought to account using the cost method. (p) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the Consolidated Group, are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the Lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (q) Earnings per Share Basic earnings per share Basic earnings per share is determined by dividing net profit (loss) after income tax attributable to members of the Company, excluding any costs of service equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figure used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financial costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 25 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (r) Financial Instruments Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. De-recognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or have expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Classification and Subsequent Measurement I. Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise. II. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. III. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method. IV. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. V. Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 26 ABN: 29 104 924 423 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Derivative instruments Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the income statement unless they are designated as hedges. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement. (s) Intangibles Software is recognised at cost of acquisition. Software has a finite life and is carried at cost less any accumulated amortisation and any impairment losses. Software is amortised over its useful life of 3 years. (t) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (u) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. The cost of mining stocks includes direct materials, direct labour, transportation costs and variable and fixed overhead costs relating to mining activities. NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Key Estimates — Impairment The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Impairment charges of $700,000 has been recognised in respect for the Litchfield and Musgrave tenements. Because of the early exploration nature of these tenements and the adverse changes to base metal prices, it is deemed prudent to write off the book value of these tenements during the year ended 30 June 2009. The Litchfield tenements are in the process of being relinquished. No impairment has been recognised in respect of new Exploration Expenditure of $11,254,943 for the year ended 30 June 2009.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 27 ABN: 29 104 924 423 NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) Key Judgments —Inter Company Receivables and Investments Effective 1 July 2008, the previous loans from the Australian Parent Entity to the Botswana 100% owned subsidiaries were converted to equity investments Accordingly, there are no receivables due to the Parent Entity from these subsidiaries at 30 June 2009 and no provision for impairment of receivables is necessary. Included in accounts receivable at 30 June 2009 are equity investments by the Parent Entity in each of the Botswana 100% owned subsidiaries as detailed in Note 12. The directors believe that the full amount of the investments in the subsidiaries is recoverable from future income of the subsidiaries and no provision for impairment of receivables has been made at 30 June 2009. Key Judgments — Taxation Losses The Parent Entity has substantial carry-forward losses for Australian taxation purposes. Deferred tax assets arising from both temporary differences and tax losses are not recognised as their realisation is not considered probable. The financial report was authorised for issue on 15 September 2009 by the board of directors. NOTE 3: REVENUE CONSOLIDATED GROUP PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ Operating activities - Interest received 545,206 552,784 270,671 1,276,879 - Net gain on transfer of tenement - 194,410 - 194,410 - Other 7,859 70,418 1,207,859 14,735 Total revenue 553,065 817,612 1,478,530 1,486,024 An annual management Service Charge of $1,200,000 is charged to the Boseto copper project in the subsidiary company Discovery Copper Botswana Proprietary Limited. NOTE 4: PROFIT/(LOSS) FOR THE YEAR Profit/(loss) from ordinary activities before income tax has been determined after: CONSOLIDATED GROUP PARENT ENTITY Expenses 2009 $ 2008 $ 2009 $ 2008 $ Remuneration of auditor Australia – audit & review services 31,300 29,500 31,300 29,500 Australia – non-audit services - - - - Botswana – audit fees paid to Ernst & Young 54,059 93,219 - - 85,359 122,719 31,300 29,500 Depreciation of fixed assets & intangibles 69,463 73,260 13,092 25,883 Exploration expenditure written off 700,000 49,990 700,000 49,990
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 28 ABN: 29 104 924 423 NOTE 5: INCOME TAX EXPENSE (a) The prima facie tax on result from ordinary activities before income tax is reconciled to the income tax as follows: CONSOLIDATED GROUP PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ Prima facie tax payable/(benefit) on result from ordinary activities before income tax at 30% (1,331,070) (1,083,267) (970,167) (684,444) Tax losses carried forward from current year result 1,331,070 1,083,267 970,167 684,444 Income tax attributable to the Consolidated Group - - - - (b) The unused tax losses for which no deferred tax asset has been recognised and the potential tax benefits from future profitable operations are: Unused tax profit/(losses) (35,202,519) (10,740,275) (7,187,543) (3,707,997) Potential tax benefit 10,560,756 5,622,082 2,156,263 1,112,399 NOTE 6: INTERESTS OF KEY MANAGEMENT PERSONNEL The Directors Report shows details of the remuneration of Key Management Personnel for the current and prior year. Details of appointment dates, position held and shares and options granted, exercised or forfeited and balances held are contained below. (a) Names and positions held of Discovery Metals Limited Key Management Personnel in office at any time during the year are: Key Management Person Position Dated Appointed Date Resigned Gordon Galt Chairman – Non-Executive 9 May 2007 Morrice Cordiner Director – Non-Executive 30 May 2003 Ribson Gabonowe Director – Non-Executive 30 April 2008 Jeremy Read Director – Non-Executive 1 February 2008 John Shaw Director – Non-Executive 13 November 2006 Brad Sampson Managing Director 1 February 2008 Paul Fulton Chief Financial Officer 25 March 2008 Ross Gibbins Business Development Executive 1 November 2008 Christian Heili Feasibility Manager 1 October 2007 Fred Nhiwatiwa Country Manager 1 July 2007
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 29 ABN: 29 104 924 423 NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION (continued) (b) Options and Rights Holdings – Number of Options held by Key Management Personnel Name Balance 1 July 2008 Granted as Compensation Options exercised Net change other* Gordon Galt 1,800,000 - - - Morrice Cordiner 1,000,000 - - (1,000,000) Ribson Gabonowe - 1,000,000 - - Jeremy Read 1,500,000 1,000,000 - (1,500,000) John Shaw 1,000,000 - - - Brad Sampson - 3,000,000 - - Paul Fulton 1,000,000 500,000 - - Ross Gibbins - 750,000 - - Christian Heili 500,000 250,000 - - Quinton Hills 500,000 - 500,000 - Fred Nhiwatiwa 500,000 250,000 - - *Net Change Other refers to options that have been forfeited or expired during the year. Name Balance 30 June 2009 Total Vested 30 June 2009 Total Exercisable 30 June 2009 Total Un-exercisable 30 June 2009 Gordon Galt 1,800,000 1,800,000 1,800,000 - Morrice Cordiner - - - - Ribson Gabonowe 1,000,000 1,000,000 1,000,000 - Jeremy Read 1,000,000 1,500,000 1,500,000 - John Shaw 1,000,000 1,000,000 1,000,000 - Brad Sampson 3,000,000 2,000,000 2,000,000 1,000,000 Paul Fulton 500,000 1,000,000 1,000,000 500,000 Ross Gibbins 750,000 250,000 250,000 500,000 Christian Heili 750,000 500,000 500,000 250,000 Quinton Hills - - - - Fred Nhiwatiwa 750,000 750,000 750,000 -
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 30 ABN: 29 104 924 423 NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION (continued) (c) Shareholdings – Number of Shares held by Key Management Personnel Name Balance 1 July 2008 Received as Compensation Options Exercised Net Change Other* Balance 30 June 2009 Gordon Galt 400,000 - - - 400,000 Morrice Cordiner - - - - - Ribson Gabonowe - - - - - Jeremy Read 600,975 - - - 600,975 John Shaw 100,000 - - - 100,000 Brad Sampson - - - - - Paul Fulton - - - - - Ross Gibbins - - - - - Christian Heili - - - - - Quinton Hills - - - - - Fred Nhiwatiwa - - - - - *Net Change Other refers to shares purchased or sold during the year. NOTE 7: EARNINGS PER SHARE CONSOLIDATED GROUP 2009 2008 (a) Reconciliation of earnings to profit or loss $ $ Net Profit/(Loss) (4,436,900) (3,610,890) Earnings used in the calculation of basic EPS (4,436,900) (3,610,890) Earnings used in the calculation of diluted EPS (4,436,900) (3,610,890) (b) Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS 153,957,557 121,213,650 Weighted average number of options outstanding 12,500,854 9,310,091 Weighted average number of ordinary shares outstanding during the year used in calculation of diluted EPS 166,458,411 130,523,741 As the above detailed “Dilution" decreases the loss per share on exercise of the options, diluted earnings per share is reported excluding the options outstanding.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 31 ABN: 29 104 924 423 NOTE 8: CASH & CASH EQUIVALENTS CONSOLIDATED GROUP PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ Cash on hand and at bank (60,943) 119,393 21,140 35,815 Short-term bank deposits 8,793,022 5,407,133 5,913,668 5,407,133 8,732,079 5,526,526 5,934,808 5,442,948 NOTE 9: TRADE & OTHER RECEIVABLES CONSOLIDATED GROUP PARENT ENTITY CURRENT 2009 $ 2008 $ 2009 $ 2008 $ Other receivables 381,768 347,546 112,432 83,612 Deposits paid 54,231 45,865 54,231 45,865 435,999 393,411 166,663 129,477 There are no balances within trade and other receivables that are not expected to be received when due. NOTE 10: PLANT AND EQUIPMENT Movement in Carrying Amounts Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year: Motor Vehicles Office & Furniture Buildings Computer & Plant & Equipment Total CONSOLIDATED ENTITY $ $ $ $ $ Gross carrying amount Balance at 1 July 2007 53,025 10,373 0 35,964 99,362 Additions 200,406 81,953 34,088 100,894 417,341 Disposals 0 0 0 0 0 Depreciation Expense (37,605) (10,893) (10,633) (31,206) (90,337) Balance at 30 June 2008 215,826 81,433 23,455 105,652 426,366 Additions 63,875 25,691 0 111,689 201,255 Disposals 0 0 0 0 0 Depreciation Expense (44,071) (23,761) (9,417) (30,465) (107,714) Translation Gains/(Losses) & Reclassification (6,714) 24,162 272 (25,762) (8,042) Balance at 30 June 2009 228,916 107,525 14,310 161,114 511,865 Depreciation charged to Exploration Asset (2,443) (1,692) (9,417) (24,699) (38,251) Net Depreciation Charge for year (41,628) (22,069) 0 (5,766) (69,463)
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 32 ABN: 29 104 924 423 NOTE 10: PLANT AND EQUIPMENT (continued) Motor Vehicles Office & Furniture Buildings Computer & Plant & Equipment Total PARENT ENTITY $ $ $ $ $ Gross carrying amount Balance at 1 July 2007 0 28,207 0 0 28,207 Additions 0 11,424 0 0 11,424 Disposals 0 0 0 0 0 Depreciation Expense 0 (22,853) 0 0 (22,853) Balance at 30 June 2008 0 16,778 0 0 16,778 Additions 0 15,999 0 0 15,999 Disposals 0 0 0 0 0 Depreciation Expense 0 (13,092) 0 0 (13,092) Balance at 30 June 2009 0 19,685 0 0 19,685 CONSOLIDATED GROUP PARENT ENTITY Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of other assets during the year: 2009 $ 2008 $ 2009 $ 2008 $ Motor Vehicles (44,071) (37,605) Office & Furniture (23,761) (10,893) (13,092) (22,853) Buildings (9,417) (10,633) Computer & Plant & Equipment (30,465) (31,206) Total (107,714) (90,337) (13,092) (22,853) NOTE 11: EXPLORATION Exploration rights and development costs carried forward in respect of areas of interest in the exploration phase : CONSOLIDATED GROUP PARENT ENTITY 2009 2008 2009 2008 $ $ $ $ Opening balance 12,273,715 6,932,569 700,000 749,990 Translation gains/(losses) 1,366,299 (935,135) - - Expenditure incurred 9,888,644 6,326,271 - - 23,528,658 12,323,705 700,000 749,990 Less expenditure written off (700,000) (49,990) (700,000) (49,990) Carrying Balance 22,828,658 12,273,715 - 700,000 Mining tenement costs are carried forward in accordance with the accounting policy set out in Note 1. The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation of the Boseto copper project and the Dikoloti nickel project in Botswana, or alternatively, sale of these areas of interest.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 33 ABN: 29 104 924 423 NOTE 12: OTHER FINANCIAL ASSETS From the time the Company secured the Botswana exploration licenses for Dikoloti (2004) and Boseto (2005), funding has been advanced from the Australian Parent Entity to the Botswana subsidiaries in the form of loans. These loans outstanding at 30 June 2008 to the Botswana subsidiaries were converted to equity investments by the Parent Entity in each of the subsidiaries on 1 July 2008. Similarly, all funds advanced from the Parent Entity after 1 July 2008 are classified as investments in each of the subsidiaries. Related Parties Ownership CONSOLIDATED GROUP PARENT ENTITY Botswana Interest 2009 $ 2008 $ 2009 $ 2008 $ Discovery Copper Botswana Pty Ltd 100% 0 0 23,304,367 1 Discovery Metals Botswana Pty Ltd 100% 0 0 1,488,262 123 Discovery Mines Pty Ltd 100% 0 0 3,513,997 226 Discovery North East Pty Ltd 100% 0 0 226 226 0 28,306,852 576 NOTE 13: RELATED PARTY LOANS From the time the Company secured the Botswana exploration licenses for Dikoloti (2004) and Boseto (2005), funding has been advanced from the Australian Parent Entity to the Botswana subsidiaries in the form of loans. These loans outstanding at 30 June 2008 to the Botswana subsidiaries were converted to equity investments by the Parent Entity in each of the subsidiaries on 1 July 2008. Similarly, all funds advanced from the Parent Entity after 1 July 2008 are classified as investments in each of the subsidiaries. CONSOLIDATED GROUP PARENT ENTITY Botswana 2009 $ 2008 $ 2009 $ 2008 $ Discovery Copper (Botswana) Pty Ltd 0 0 0 2,457,044 Discovery Metals (Botswana) Pty Ltd 0 0 0 8,689,080 Discovery Mines Pty Ltd 0 0 0 0 Discovery North East Pty Ltd 0 0 0 3,352,759 0 0 0 14,498,883 NOTE 14: INTANGIBLE ASSETS CONSOLIDATED GROUP PARENT ENTITY Computer Software 2009 2008 2009 2008 Gross carrying amount $ $ $ $ Balance at 1 July 2007 3,511 3,511 Additions 0 0 Amortisation Expense 3,030 3,030 Balance at 30 June 2008 481 481 481 481 Additions Amortisation Expense (481) (481) Balance at 30 June 2009 0 481 0 481
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 34 ABN: 29 104 924 423 NOTE 15: TRADE AND OTHER PAYABLES CONSOLIDATED GROUP PARENT ENTITY Current Liabilities 2009 $ 2008 $ 2009 $ 2008 $ Accrued Expenses 569,582 144,720 144,830 124,460 Related Party Liability 0 0 19,858 0 Trade creditors 802,687 1,163,976 205,814 121,976 1,372,269 1,308,696 370,502 246,436 Accrued Expenses includes withholding, VAT & GST taxes withheld from payments to supplier and payable the month following deduction. NOTE 16: PROVISIONS Current Liabilities CONSOLIDATED GROUP PARENT ENTITY Employee Leave Entitlements 2009 $ 2008 $ 2009 $ 2008 $ Opening Balance 23,289 24,536 23,289 24,536 Increase during year 134,080 (1,247) 61,874 (1,247) Closing Balance 157,369 23,289 85,163 23,289 NOTE 17: ISSUED CAPITAL The shares issued are for the parent entity and are the same for the Consolidated Group. 2009 $ 2008 $ 2009 Shares 2008 Shares Fully paid ordinary shares at 30 June 43,696,900 27,864,491 194,078,380 130,102,195 (a) Ordinary Shares At beginning of reporting year 27,864,491 16,564,837 130,102,195 95,758,430 Shares issued during the year: - Issued at 18 cents each 7,914,662 43,970,345 - Issued at 30 cents each 150,000 375,000 500,000 1,250,000 - Issued at 35 cents each 507,500 1,450,000 - Issued at 36 cents each 11,065,685 31,643,765 - Issued at 42 cents each 8,192,453 19,505,840 Transaction costs relating to share issues (424,706) (648,531) At reporting date 43,696,900 27,864,491 194,078,380 130,102,195
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 35 ABN: 29 104 924 423 NOTE 17: ISSUED CAPITAL (continued) (a) Ordinary Shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid upon shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. To date, the Company has been solely equity funded and the Company will continue to issue shares to fund its exploration and evaluation activities for the Boseto copper project and other corporate activities. Project funding for the Boseto copper project is expected to be placed in 2010 and will be a combination of debt and equity in a ratio yet to be decided. (b) Options At 30 June 2009 there were 35,660,569 (2008: 10,015,525) unissued ordinary shares of Discovery Metals Limited for which options were outstanding as follows: Grant Date Date of Expiry Exercise Price Number under Option 30/03/2007 1/05/2010 $0.30 500,000 30/03/2007 1/05/2010 $0.35 500,000 1/05/2007 1/04/2010 $0.30 500,000 31/08/2007 1/05/2010 $0.30 1,000,000 31/08/2007 1/05/2010 $0.35 800,000 31/08/2007 1/09/2010 $0.26 718,188 31/08/2007 1/09/2010 $0.30 1,000,000 5/12/2007 5/12/2010 $0.36 497,337 4/02/2008 1/10/2010 $0.36 250,000 4/02/2008 1/10/2011 $0.36 250,000 8/05/2008 25/03/2012 $0.43 500,000 8/05/2008 25/03/2013 $0.54 500,000 12/12/2008 1/02/2012 $0.44 1,000,000 12/12/2008 1/02/2013 $0.55 1,000,000 12/12/2008 12/12/2011 $0.50 2,000,000 31/12/2008 1/11/2012 $0.26 750,000 31/12/2008 1/11/2013 $0.32 750,000 29/04/2009 1/11/2013 $0.375 500,000 25/06/2009 1/11/2013 $0.35 1,000,000 30/06/2009 1/11/2013 $0.375 750,000 30/06/2009 1/11/2012 $0.375 100,000 30/06/2009 25/05/2010 $0.30 20,795,044 35,660,569 During the year ended 30 June 2009, the following ordinary shares of Discovery Metals were issued on the exercise of options granted under the Discovery Metals Option Plan. No amounts are unpaid on any of the shares. Grant Date Exercise Price Number of Shares Issued 27/08/2008 $0.30 500,000 No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 36 ABN: 29 104 924 423 NOTE 18: RESERVES CONSOLIDATED GROUP PARENT ENTITY 2009 2008 2009 2008 $ $ $ $ Option Reserve 2,715,031 1,819,551 2,568,956 1,714,551 Foreign Currency Translation Reserve 486,935 (912,525) 0 0 3,201,966 907,026 2,568,956 1,714,551 Option Reserve The option reserve records items recognised as expenses on valuation of employee and service provider share options. Foreign Currency Translation Reserve The foreign currency translation reserve records exchange differences arising on translation of the foreign controlled subsidiaries assets to Australian Dollars at the balance date. NOTE 19: ACCUMULATED LOSSES CONSOLIDATED GROUP PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ Accumulated losses at the beginning of the year 11,483,003 7,872,113 9,059,624 6,778,143 Net loss attributable to members of Discovery Metals Limited 4,436,900 3,610,890 3,233,889 2,281,481 Accumulated losses at the end of the year 15,919,903 11,483,003 12,293,513 9,059,624 NOTE 20: CONTINGENT LIABILITIES There are no known contingent liabilities. There has been no change in contingent liabilities and assets since the last annual reporting date.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 37 ABN: 29 104 924 423 NOTE 21: COMMITMENTS (a) Minimum exploration work The Consolidated Group has certain obligations to perform minimum exploration work and expend minimum amounts of money on mineral exploration tenements. The Consolidated Group has committed to expend a minimum of $2.311 million over the next year ($5.479 million over the next 3 years) to keep its current tenements in good standing, excluding $514,000 to be spent by other parties on the Australian tenements. (b) Lease expenditure commitments CONSOLIDATED GROUP PARENT ENTITY Operating leases (non-cancellable) Minimum lease payments 2009 $ 2008 $ 2009 $ 2008 $ - not later than one year 146,129 134,561 104,424 107,424 - later than one year and not later than five years 82,967 170,849 47,591 139,189 Aggregate lease expenditure contracted for at reporting date but not provided for 229,096 305,410 152,015 246,613 The Company ‘s Brisbane office is leased has been extended until 17 October 2010 at $8,187 per month plus outgoings. The Brisbane office photocopier lease runs for 5 years from 1 July 2008 at $515 per month. The Company’s Gaborone office is leased until 31 August 2010 at Pula 15,796 per month plus outgoings. The Gaborone office photocopier lease runs for 5 years from 1 July 2009 at Pula 3,416 per month. NOTE 22: SEGMENT REPORTING The Consolidated Group operates in one business segment being the mining industry, in two geographical locations, being Australia and Botswana. Geographical Segments Segment Revenues from External Customers Carrying Amount of Segment Assets Acquisitions of Non-current Segment Assets 2009 $000 2008 $000 2009 $000 2008 $000 2009 $000 2008 $000 Country: Australia 8 209 20 17 16 11 Botswana 0 56 492 382 185 406 8 265 512 399 201 417 NOTE 23: RELATED PARTY TRANSACTIONS During the financial year, transactions occurred between the Consolidated Group and companies controlled by directors and executives. These transactions were limited to the payment of the remuneration covered and disclosed in the remuneration report section of the Director’s Report and in Note 6. Additionally, Mining Investors Australia Pty Limited, a related party of director Morrice Cordiner performed consulting services associated with a capital placement for a charge of $5,993 during the year.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 38 ABN: 29 104 924 423 NOTE 24: SHARE BASED PAYMENTS The Company’s option plan for key management personnel (being directors and executives receiving the highest remuneration) are shares option in the parent entity and are the entitlement and obligations are identical for the Consolidated Group. Key external advisers to the Company’s AIM listing in September 2007 received a total of 2,215,525 vested share options at an average of $0.30. During the first half of 2009, all share placements at 18 cents per share attracted a two-for-three option to purchase shares at 30 cents and expiring 25 May 2010. The timing is linked to Boseto copper project funding requirements. All options granted to key management personnel and external advisers are ordinary shares in Discovery Metals Limited, which confer a right of one ordinary share for every option held. Refer to the remuneration section of the Directors Report for further information. 2009 2008 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $ Outstanding at the beginning of the year 10,015,525 .334 6,500,000 .32 Granted 28,645,044 .332 6,215,525 .34 Exercised 500,000 .300 2,700,000 .33 Expired 2,500,000 .325 0 0 Outstanding at year-end 35,660,569 .334 10,015,525 .34 Exercisable at year-end 32,410,569 326 8,515,525 .31 There were 500,000 options exercised on 27 August 2008, when the Company’s shares were trading at $0.39. The options outstanding at 30 June 2009 had a weighted average exercise price of $0.334 and a weighted average remaining contractual life of 1.549 years. Exercise prices range from $0.26 to $0.375 for service providers and from $0.26 to $0.55 in respect of options outstanding at 30 June 2009. Management options are disclosed in the Directors Report remuneration section. The weighted average fair value of the options granted during the year was $0.08 per option for a total value of $656,915. This value of the options was calculated by using a Black Scholes option pricing model applying the following inputs for the year ended 30 June 2009: Weighted Average 2009 2008 Exercise price $0.3323 $0.3428 Life of the option 1.595years 3.099 years Underlying share price $0.158 $0.417 Expected share price volatility .96 .80 Risk free interest rate 3.77% 6.30% Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future tender, which may not eventuate. The life of the options is based on the historical exercise patterns, which may not eventuate in the future. Included under employee benefits expense in the income statement is $895,480 (2008: $1,171,360), and relates, in full, to equity-settled share-based payment transactions. During the year the Company installed an Employee Share Scheme for all employees who were “not granted options as part of their salary package”. The scheme is not applicable to management personnel. The scheme provides for up to 10% of the employee’s salary to be granted as shares in the Parent Entity and is subject to satisfactory performance of the individual, the Company’s safety performance and continued service by the employee for the 2 years following the award year. No shares have been issued to date.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 39 ABN: 29 104 924 423 NOTE 25: EVENTS SUBSEQUENT TO REPORTING DATE No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Consolidated Group, the results of those operations or the state of affairs of the Consolidated Group in future financial years other than the following:  On 2 July 2009, a ground water resource for the Boseto project was delineated with an estimated capacity to supply more than four times the project’s planned water requirement for more than 15 years ‐ located within 15 km of the proposed plant site;  On 30 July 2009, the Quarterly Activities report for the Company reported progress on the Boseto Bankable Feasibility Study and exploration drilling and soil sampling.  On 10 August 2009, the final group of assays for the Boseto Bankable Feasibility Study drilling programme results for the Zeta Prospect were reported. NOTE 26: CASH FLOW INFORMATION Reconciliation of Cash Flow from Operations with Profit/(Loss) after Income Tax CONSOLIDATED GROUP PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ Profit/(Loss) after income tax (4,436,900) (3,610,890) (3,233,889 (2,281,481) Non-cash flows in result Exploration expenditure written off 700,000 49,990 700,000 49,990 Amortisation 481 3,030 0 3,030 Incorporation costs written off 0 741 0 0 Gain on transfer of tenement 0 0 0 0 Unrealised gain on investments 0 0 0 Gain on investment 0 (194,410) 0 (194,410) Depreciation 115,756 90,337 13,092 22,853 Share based payment 895,480 1,171,360 854,405 1,066,360 Changes in assets and liabilities: (Increase)/decrease in receivables (42,588) (53,090) (37,186) 206,430 Increase/(decrease) in payables 63,573 83,916 124,066 (188,970) Increase/(decrease)in provisions 134,080 (1,247) 61,874 (1,247) Cash flows from operations (2,570,118 (2,460,263) (1,517,638) (1,317,445) NOTE 27: FINANCIAL RISK MANAGEMENT The group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable and loans to and from subsidiaries. The group does not speculate in the trading of derivative instruments. A finance committee consisting of senior executives of the group meets on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The committee’s overall risk management strategy seeks to assist the Consolidated Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 40 ABN: 29 104 924 423 NOTE 27: FINANCIAL RISK MANAGEMENT (continued) The finance committee operates under policies approved by the board of directors. Risk management policies are approved and reviewed by the Board on a regular basis. These include the timing and method of raising finance to fund the ongoing activities of the Company. (a) Credit and Interest Rate Risk The Consolidated Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates, and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Weighted Average Effective Interest Rate Floating Interest Rate Weighted Average Effective Interest Rate Floating Interest Rate Financial Assets 2009 2009 $ 2008 2008 $ Cash at bank 2.9% (60,943) 7.2% 119,393 Deposits at call 5.1% 8,793,022 7.9% 5,407,133 Total Financial Assets 5.1% 8,732,079 7.9% 5,526,526 Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, and deposits with banks. At 30 June 2009, the Company had funds invested with Westpac in Australia and with First National Bank in Botswana. The Company has a policy in place to ensure that surplus cash is invested with financial institutions of appropriate credit worthiness. The Australian deposits are placed with financial institutions with an “A” rating or better. Up to 6 months of Botswana operational funding can be kept on deposit in Botswana. (b) Foreign Currency Risk The Consolidated Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the Consolidated Group’s measurement currency. (c) Liquidity Risks The Consolidated Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash funding or overdraft facilities are maintained. (d) Price Risks The Consolidated Group is exposed to commodity price risk through its Boseto copper project and the impact the copper price will have on the ability of the Company to proceed with development of the project in 2010 with first production expected in 2011. Copper prices have rebounded strongly on the London Metals Exchange since the Global Financial Crisis. Copper futures markets and economic forecasts are constantly monitored to determine whether the Company needs to change its strategy of developing the Boseto copper project. (e) Net Fair Values The net fair values of listed investments have been valued at the quoted market bid price at balance date adjusted for transaction costs expected to be incurred. For other assets and other liabilities the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments. Financial assets where the carrying amount exceeds net fair values have not been written down as the Consolidated Group intends to hold these assets to maturity. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and in the notes to the financial statements. (f) Sensitivity Analysis The Consolidated Group has performed sensitivity analysis relating to its exposure to interest rate risk and foreign currency risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 41 ABN: 29 104 924 423 NOTE 27: FINANCIAL RISK MANAGEMENT (continued) CONSOLIDATED GROUP PARENT ENTITY Currency Risk 2009 $ 2008 $ 2009 $ 2008 $10% Weakening of Australian Dollar - Profit/Loss impact 9,450 (159,291) 0 0 - Exploration Asset 0 (658,368) 0 0 - Investment in Subsidiaries 0 0 2,702,815 0 10% Strengthening Australian Dollar - Profit/Loss impact (9,450) 159,291 0 0 - Exploration Asset 0 658,368 0 0 - Investment in Subsidiaries 0 0 (2,702,815) 0 Currency risk applies to a portion of exploration and project costs for the Botswana subsidiaries. The impact on the profit/(loss) for the year relates to administration expenditure, with the exploration expenditure capitalised on the Balance Sheet. With the change in classification of the previous loans to an equity investment by the Parent Entity in the Botswana subsidiaries, the impact of Australia dollar to Botswana Pula currency fluctuations appear in the accounts of the Parent Entity and the foreign currency translation reserve in the Consolidated Group accounts. CONSOLIDATED GROUP PARENT ENTITY 2009 2008 2009 2008 $ $ $ $ Interest Risk –Profit/Loss impact Lowering of interest rate on funds on deposit by 100 basis points (100,726) (82,798) (72,801) (79,353) Increase of interest rate on funds on deposit by 100 basis points 100,726 82,798 72,801 79,353 As the Company has been debt free with equity investors providing funding in advance of requirements, interest rate risk is determined by applying the sensitivity to average cash deposits during the reporting year. NOTE 28: CHANGE IN ACCOUNTING STANDARDS The following Australian Accounting Standards have been issued or amended and are applicable to the Parent Entity and Consolidated Group but are not yet effective. They have not been adopted in preparation of the financial statements at the reporting date. a) Application Date for Group - 1 July 2009 Reference Application date Title Summary Expected Impact AASB 123 1 January 2009 Borrowing Costs Revised standard – requires borrowing costs directly attributable to qualifying assets to be capitalised, where previously they could be immediately expensed. No expected impact as the group do not incur any significant external borrowing costs. AASB 2007-6 1 January 2009 Amendments to Australian Accounting Standards arising from AASB 123 Amends AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12 as a result of issue of AASB 123 There will be no direct impact to the amounts included in the financial group as they already capitalise borrowing costs related to qualifying assets.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 42 ABN: 29 104 924 423 Reference Application date Title Summary Expected Impact AASB 8 1 January 2009 Segment Reporting New standard which replaces AASB 114. Applies to listed entities only. Disclosures only AASB 2007-3 1 January 2009 Amendments to Australian Accounting Standards arising from AASB 8 Amends AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 & AASB 1038 as a result of issue of AASB 8 No material impact expected. AASB 101 1 January 2009 Presentation of Financial Statements Revised standard – amends disclosure requirements and format of financial statements Disclosures only AASB 2007-8 1 January 2009 Amendments to Australian Accounting Standards arising from AASB 101 Amends the majority of standards and Interpretations as a result of issue of AASB 101 Disclosures only AASB 2008-91 January 2009 Amendments to AASB 1049 for Consistency with AASB 101 Amends AASB 1049 to reflect revised requirements of AASB 101 – applies to public sector (Whole of Government) entities only Disclosures only AASB 2008-1 1 January 2009 Amendments to Australian Accounting Standards Share Based Payments – Vesting Conditions and Cancellations Amends AASB 2 to clarify requirements relating to vesting conditions and cancellations No material impact expected. AASB 2008-2 1 January 2009 Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations Arising on Liquidation Amends AASB 132, AASB 139, AASB 7, AASB 101 and Interpretation 2 to introduce an exception to the definition of financial liability for certain puttable financial instruments No material impact expected. AASB 3 1 July 2009 Business Combinations Revised Standard No material impact expected. AASB 127 1 July 2009 Consolidated and Separate Financial Statements Revised Standard No material impact expected. AASB 2008-5 1 January 2009 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 7, 101, 102, 107, 108, 110, 116, 118, 119, 120, 123, 127, 128, 129, 131, 132, 134, 136, 138, 139, 140, 141, 1023 & 1038] Amends a number of standards as a result of the annual improvements project. No material impact expected. AASB 2008-6 1 July 2009 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1 & AASB 5] Amends a number of standards as a result of the annual improvements project. No material impact expected.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 43 ABN: 29 104 924 423 AASB 2008-7 1 January 2009 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate [AASB 1, AASB 118, AASB 121, AASB 127 & AASB 136] Amends a number of standards in relation to the cost of an investment in a subsidiary, jointly controlled entity or associate, including treatment of pre- acquisition dividends. No material impact expected. AASB 2009-2 1 January 2009 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038] Amends AASB 7 to require enhanced disclosures about fair value measurements and liquidity risk. Disclosures only AASB 2009-4 1 July 2009 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 2, 138, Interpretations 9, 16] Amends a number of standards and interpretations as a result of the annual improvements project. No material impact expected. b) Application Date for Group - 1 July 2010 Reference Application date Title Summary Expected Impact AASB 2009-5 1 January 2010 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136, 139] Amends a number of standards as a result of the annual improvements project. No material impact expected. AASB 2009-8 1 January 2010 Amendments to Australian Accounting Standards – Group Cash- settled Share-based Payment Transactions [AASB 2] Amends AASB 2 Share-based Payment and supersedes Interpretation 8 Scope of AASB 2 and Interpretation 11 AASB 2 – Group and Treasury Share Transactions. The amendments clarify the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when the entity has no obligation to settle the share-based payment transaction. No material impact expected.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 44 ABN: 29 104 924 423 NOTE 29: CONTROLLED ENTITIES Controlled Entities Consolidated Percentage Owned (%) Subsidiary Country of Incorporation 2009 2008 Discovery Copper Botswana (Proprietary) Ltd Botswana 100% 100% Discovery Metals Botswana (Proprietary) Ltd Botswana 100% 100% Discovery Mines (Proprietary) Ltd Botswana 100% 100% Discovery North East (Proprietary) Ltd Botswana 100% 100% On 4 April 2008, Botswana Copper Corporation Ltd was deregistered. The company was initially registered in April 2006 to pursue project activities in Australia. However with the focus on developing the Boseto Copper Project towards production, this entity was no longer required. The company had effectively not operated at any time during its incorporation. NOTE 30: EXCHANGE RATES The following exchange rates were used to convert the Botswana Pula based transactions and account balances of the four Botswana 100% subsidiaries into Australian dollars for the Consolidated Group accounts. CONSOLIDATED GROUP 2009 2008 Spot rate for end of year balances Pula:AUD 5.528 6.35 AUD:Pula 0.1809 0.1575 Average rate applied to revenue, costs, Pula:AUD 5.5094 5.5848 capital additions and disposals AUD:Pula 0.1819 0.1791 NOTE 31: COMPANY DETAILS The Registered Office of the Company is: The Australian office is: The Botswana office is: Level 8 Level 8 Unit 2, Ipelo House Plot 103, 410 Queen Street 410 Queen Street International Commerce Park BRISBANE QLD 4000 BRISBANE QLD 4000 GABORONE, Botswana NOTE 32: CHANGES IN ACCOUNTING ESTIMATES AND ERRORS IN PRIOR PERIODS (a) Foreign Currency Translation Loss not eliminated for Group Profit The following prior period adjustments relate to exchange differences arising at period end in relation to the Australian dollar intercompany loans receivable from overseas subsidiaries. In prior periods the foreign exchange gain or loss has been recognised in the income statement. Given that settlement is neither planned nor likely to occur in the foreseeable future the loan should be considered as part of the Parent Entity’s net investment in foreign operations. In accordance with AASB 121, such foreign exchange differences are recognised separately in equity on consolidation. The Company has restated prior year balances to reflect the correct treatment under AASB 121 as follows. The Company has reversed foreign exchange expense of $1,166,845 in 2008 and $388,112 relating to periods before 30 June 2007 from the income statement to the reserve. A reconciliation to previously reported amounts is included at 32(c) i, iv and v below.
    • NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 30 June 2009 Discovery Metals Limited Financial Report 2009 Page 45 ABN: 29 104 924 423 NOTE 32: CHANGES IN ACCOUNTING ESTIMATES AND ERRORS IN PRIOR PERIODS (continued) (b) Recognition of Dikoloti Expenditure on Balance Sheet In 2005 and 2006, approximately $3.1m was paid in respect of the Dikoloti tenements. $2.5m was paid to the previous holder of the tenements and diluting joint venture party Falconbridge (which is now part of Xstrata). The total expenditure was:- Year ended 30 June 2005 $2,194,866 Year ended 30 June 2006 $ 924,697 Total $3,119,563 Discovery Metals policy on exploration expenditure states that “Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.” Prior to 2007, the Dikoloti project was the main project and focus for the Company (which was then known as Discovery Nickel Limited) as this was the period before the Boseto copper project leases were secured. The Dikoloti project has always been considered economic by the Company and this was the motivation for the farm in arrangement and the additional exploration expenditure. The Company continues to believe the Dikoloti nickel project is economically viable at nickel prices above $5 per pound and is in the final stages of entering a new joint venture to inject a further $3m into the project with the aim to double the resource size and thereby extend the project life beyond 10 years. The expenditure incurred by Discovery Metal Limited is shown as an investment in the subsidiary Discovery North East Proprietary Limited. A reconciliation to previously reported amounts has been included at (c)ii below. (c) Changes to Prior Periods Reconciliation Balance Sheet 30 June 2007 Previously Reported Adjustment Restated Figures i. Equity – Foreign Exchange Reserve 32(a) 206,445 (388,112) (181,667) ii. Asset – Exploration Asset 32(b) $3,813,006 $3,119,563 $6,932,569 iii. Equity – Accumulated Losses 32(a) & (b) ($11,379,788) $3,507,675 ($7,852,113) Income Statement 30 June 2008 Previously Reported Adjustment Restated Figures iv. Loss for the year ended 30 June 2008 32(a) $4,777,735 ($1,166,845) $3,610,890 Earnings per share undiluted – cents per share (3.94)c 0.96c (2.98)c Balance Sheet 30 June 2008 Previously Reported Adjustment Restated Figures v. Equity – Foreign Currency Translation Reserve 32(a) $642,432 ($1,554,957) ($912,525) vi. Equity – Accumulated Losses 32(a) & (b) ($16,157,523) 4,674,520 (11,483,003)
    • ASX INFORMATION Discovery Metals Limited Financial Report 2009 Page 46 ABN: 29 104 924 423 1. Shareholdings at 31 August 2009 a. Distribution of Shareholders Number Category (size of Holding) Number of Ordinary Shareholders 1-1,000 101 1,001-5,000 297 5,001-10,000 234 10,001-100,000 562 100,001 and over 114 AUSTRALIAN SHAREHOLDERS ONLY 1,308 b. The number of shareholdings held in less than marketable parcels is 216. c. The names of the substantial shareholders listed in the holding Company’s register at 31 August 2009 are: Number of Ordinary Fully Paid Shares % Held of Issued Ordinary Capital Macquarie Bank Ltd 27,936,391 14.4% Taurus SM Holdings Pty Ltd 25,379,991 13.1% Resource Capital Fund IV LP 21,237,428 10.9% Investec Asset Management 15,430,544 7.9% Botswana Insurance Fund Management 10,743,221 5.5% d. Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. e. 20 Largest Shareholders – Ordinary Shares Number of Ordinary Fully Paid Shares % Held of Issued Ordinary Capital Macquarie Bank Ltd 27,936,392 14.39% Taurus SM Holdings Pty Ltd 25,379,991 13.07% Resource Capital Fund IV LP 21,237,428 10.94% Investec Asset Management 15,430,544 7.95% Botswana Insurance Fund Management 10,743,221 5.53% Trafigura Beheer BV 8,841,863 4.55% HSBC Custody Nominees <Australia> Limited 7,152,008 3.68% Merrill Lynch (Australia) Nominees Pty Limited <Berndale a/c> 4,000,000 2.06% National Nominees Limited <Cash Income a/c> 3,640,500 1.87% ANZ Nominees Limited <Cash Income a/c> 2,453,775 1.26% Walkabout Superannuation Fund Pty Ltd < Walkabout Super Fund a/c> 1,245,050 0.64% Wholesalers (Morley) Pty Ltd 1,220,000 0.62% Hillboi Nominees Pty Ltd 1,162,074 0.59% Planline Pty Ltd <Phillip Stivens S/F a/c> 1,000,000 0.51% Grenfam 2 Pty Ltd <Greenwich ASX a/c> 854,950 0.44% DBB Pty Ltd 837,500 0.43% Peter Martin Vanderspuy 700,000 0.36% Cavil Singh <The Handmade a/c> 680,000 0.35% Koranya Pty Ltd <Koranya P/L Super Fund a/c> 658,500 0.34% Bruce John & Jane Elizabeth Robinson 650,000 0.33% 135,823,796 69.91%
    • ASX INFORMATION Discovery Metals Limited Financial Report 2009 Page 47 ABN: 29 104 924 423 2. The name of the company secretary is Roslynn Shand. 3. The address of the principal registered office in Australia is: Level 8 410 Queen Street BRISBANE QLD 4000 Telephone (07) 3218 0222 Facsimile (07) 3218 0233 4. Registers of securities are held at the following address: Computershare Investor Services Pty Limited 19/307 Queen Street BRISBANE QLD 4000 Telephone (07) 3237 2100 Toll free number 1300 552 270 5. The Company address in Botswana is: Unit 2, Ipelo House Plot 103, International Commerce Park Gaborone, Botswana Telephone: +267 318 0751 Facsimile: +267 318 0752 6. Stock Exchange Listings Quotation has been granted for all the ordinary shares of Discovery Metals Limited on all Member Exchanges of the Australian Stock Exchange Limited (“ASX:DML”). Discovery Metals Limited is also listed on the Botswana Stock Exchange (“BSE:DML”) and the Alternative Investment Market on the London Stock Exchange (“AIM:DME”). 7. Unquoted Securities Options over unissued shares in Discovery Metals Limited. A total of 35,660,569 options were on issue at 30 June 2009, to shareholders, directors, executives and key advisers to the AIM listing. Since 30 June 2009, no options have been exercised, granted or expired.
    • DIRECTORS DECLARATION Discovery Metals Limited Financial Report 2009 Page 48 ABN: 29 104 924 423 The directors of Discovery Metals Limited declare that: 1. The financial statements and notes, comprising the statement of financial performance, statement of financial position, statement of cash flows and notes to the financial statements, are in accordance with the Corporations Act 2001: (a) comply with Accounting Standards and the Corporations Regulations 2001; and (b) give a true and fair view of the financial position as at 30 June 2009 and of the performance for the year ended on that date of the Company and the Consolidated Group; 2. The Chief Executive Officer and Chief Financial Officer have each declared that: (a) the financial records of the Consolidated Group for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; (b) the financial statements and notes for the financial year comply with the Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view. 3. In the directors’ opinion there are reasonable grounds to believe that the Consolidated Group will be able to pay its debts as and when they become due and payable. The Company and its wholly-owned subsidiaries, as declared in Note 29 of the notes to the financial statements, have entered into a deed of cross guarantee under which the Company and its subsidiaries guarantee the debts of each other. At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are, or may become subject to, by virtue of the deed. This declaration is made in accordance with a resolution of the Board of Directors. Brad Sampson Gordon Galt Managing Director Chairman Brisbane: 15 th September,2009.
    • Level 12, 60 Castlereagh Street Sydney NSW 2000 GPO Box 5138 Sydney NSW 2001 T +6 2 9233 8933 F +61 2 9233 8521 www.rsmi.com.au L:Shared DataAUDITClientsDiscovery Metals Ltd 824000200930 June 2009Ind Dec_Lhead_ p51.doc Liability limited by a scheme approved under Professional Standards Legislation Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036 RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms. AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Discovery Metals Limited for the year ended 30 June 2009, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM BIRD CAMERON PARTNERS Chartered Accountants Sydney, NSW Wayne Beauman Dated: 15 September 2009 Partner PaPage 51 Liability limited by a scheme approved under Professional Standards Legislation Page 49
    • Level 12, 60 Castlereagh Street Sydney NSW 2000 GPO Box 5138 Sydney NSW 2001 T +6 2 9233 8933 F +61 2 9233 8521 www.rsmi.com.au Liability limited by a scheme approved under Professional Standards Legislation Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036 RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DISCOVERY METALS LIMITED Report on the Financial Report We have audited the accompanying financial report of Discovery Metals Limited (“the company”), which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Page 52 Liability limited by a scheme approved under Professional Standards Legislation Page 50
    • Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of Discovery Metals Limited on 15 September 2009, would be in the same terms if provided to the directors as at the date of this auditor's report] Auditor’s Opinion In our opinion: (a) the financial report of Discovery Metals Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company's and consolidated entity’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; [and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the financial year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the Remuneration Report of Discovery Metals Limited for the financial year ended 30 June 2009 complies with section 300A of the Corporations Act 2001. RSM BIRD CAMERON PARTNERS Chartered Accountants Sydney, NSW Wayne Beauman Dated: 16 September 2009 Partner Page 53 Liability limited by a scheme approved under Professional Standards Legislation Page 51
    • CORPORATE GOVERNANCE Discovery Metals Limited Financial Report 2009 Page 52 ABN: 29 104 924 423 CORPORATE GOVERNANCE Introduction In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Discovery Metals Limited have adhered to the principles of corporate governance and this statement outlines the main corporate governance practices in place throughout the financial year. The ASX Corporate Governance Council released revised Corporate Governance Principles and Recommendations on 2 August 2007. Having regard to the size of the Company and the nature of its enterprise, it is considered that the Company complies as far as possible with the spirit and intentions of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. 1. Board of Directors The Board of Directors of the Company is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. As the Board acts on behalf of shareholders, it seeks to identify the expectations of shareholders, as well as other ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuing arrangements are in place to adequately manage those risks. A Board Charter has been adopted by the Board and primary responsibilities include:  formulation and approval of the strategic direction, objectives and goals of the Company;  monitoring the operational and financial position and performance of the Company, including approval of the Company’s financial statements;  requiring that financial and other reporting mechanisms are put in place which result in adequate, accurate and timely information being provided to the Board and the Company's shareholders and the financial market as a whole being fully informed of all material developments relating to the Company;  ensuring that adequate internal control systems and procedures exist and that compliance with these systems and procedures is maintained;  the identification of significant business risks and ensuring that such risks are adequately managed;  appointment of the Managing Director and all direct executive reports, the review of their performance and remuneration;  the establishment and maintenance of appropriate ethical standards; and  reviewing and, to the extent necessary, amending the Board and Committee Charters regularly. Due to its size and structure, the Board of Directors is able to meet regularly throughout the year for management and formal Board meetings, as well as being in frequent communication by way of telephone to ensure compliance with ASX Listing Rule disclosure requirements. The responsibility for the operation and administration of the Company is carried out by the Managing Director, who operates in an executive capacity, supported by senior professional staff. The Board ensures that this team is suitably qualified and experienced to discharge their responsibilities, and assesses on an ongoing basis the performance of the management team, to ensure that management’s objectives and activities are aligned with the expectations and risks identified by the Board. The current directors of the Company are as follows: Mr Gordon Galt - Chairman – Independent Mr Brad Sampson - Managing Director Mr Morrice Cordiner - Non-Executive Director – Independent Mr Ribson Gabonowe - Non-Executive Director - Independent Mr Jeremy Read - Non-Executive Director Mr John Shaw - Non-Executive Director – Independent For information in respect to each director refer to the directors’ report.
    • CORPORATE GOVERNANCE Discovery Metals Limited Financial Report 2009 Page 53 ABN: 29 104 924 423 The following policies or obligations have been established by the Board and are available on the Company’s website:  Continuous disclosure  Code of Conduct  Share trading  Audit & Financial Risk  Board Charter  Risk Management 2. Independent Directors Under ASX guidelines four of the current Board members are considered to be independent, namely the Chairman, Mr Gordon Galt and the three non-executive directors, Mr Cordiner, Mr Shaw and Mr Gabonowe. Mr J Read is a former Managing Director and under the ASX guidelines is not considered to be independent by virtue of his previous position. The Board is considered to be appropriate for the size of the Company and the nature of its operations and is a cost effective structure for managing the Company. 3. Board Composition When the need for a new director is identified, selection is based on the skills and experience of prospective directors, having regard to the present and future needs of the Company. Any director so appointed must then stand for election at the next meeting of shareholders of the Company. 4. Term of Appointment as a Director The constitution of the Company provides that a director other than the Managing Director may not retain office for more than three calendar years or beyond the third annual general meeting following his or her election, whichever is longer, without submitting for re-election. One third of the directors must retire each year and are eligible for re-election. The directors who retire by rotation at each Annual General Meeting are those with the longest length of time in office since their appointment or last election. 5. Risk Management and Internal Controls Audit and Financial Risk Committee The Board has established an Audit and Financial Risk Committee. The Committee members are: Morrice Cordiner (Chairman) Gordon Galt John Shaw The Committee’s responsibilities include:  providing the Board with advice and recommendations regarding the ongoing development of financial risk oversight and management policies (covering oversight, risk profile, risk management, compliance and control) that set out the roles and respective accountabilities of the Board, the Audit Committee, management and the internal audit function;  receiving and reviewing management’s recommendations and providing the Board with advice and recommendations regarding the establishment of a financial risk management system and financial risk profile;  receiving a report from management and reviewing, at least annually, the effectiveness of the Company’s implementation of the financial risk management system;  regularly reviewing the Company’s financial risk profile (provided by management) having regard to key financial risk, legal and regulatory risk and disclosure and reporting;  reviewing internal control and audit functions and their effectiveness;
    • CORPORATE GOVERNANCE Discovery Metals Limited Financial Report 2009 Page 54 ABN: 29 104 924 423  reviewing financial statements provided by management for accuracy, adequacy and clarity to ensure they give a true and fair view of the Company’s financial position and adhere to accounting standards and policies and legislative requirements;  with respect to the external auditor, approving and recommending policies and procedures for appointing or removing an external auditor and terms of engagement;  regularly reviewing and assessing the compliance of the external auditor with policies and procedures, the effectiveness and independence of the external auditor; and  monitoring the relationship between management and the auditor. The Audit and Financial Risk Committee meets as required but at a minimum at least twice a year. The Managing Director and the Chief Financial Officer are invited to attend the Audit and Financial Risk Committee meetings. The Board and Audit and Financial Risk Committee also, to a certain extent, rely on the auditors to ensure compliance with relevant accounting standards and gives full and complete co-operation to its auditors without absolving itself of its responsibility. Where appropriate the Board and the Audit & Financial Risk Committee engage independent experts or professional advisors to assist with the identification and/or management of any key risk areas identified. To ensure that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the risks and opportunities identified, the Board has also adopted a Risk Management Policy to:  ensure the Company’s risk management policies and procedures are adequate;  monitor compliance with the Company’s risk management policies and procedures;  keep itself appraised of the latest developments, policies, trends in relation to financial matters, rules, regulations to the extent that they may affect the Company or the markets in which the Company operates;  oversee the establishment and implementation of a risk management system and review (at least annually) the effectiveness of the Company’s implementation of that system;  review the Company’s internal financial control mechanisms and risk management policies;  compile a risk profile of the material risks facing the Company;  establish and implement a system for identifying, assessing, monitoring and managing material risk throughout the Company;  review major non-financial regulatory matters covering areas of exposure including the environment, safety and health, asset protection (including insurance), discrimination and harassment, conflict of interest and ethical standards. Each year the Managing Director and the Chief Financial Officer provide a statement to the Board in writing in respect to the integrity of the financial statements, that they are founded on a sound system of risk management and internal compliance and control, and that the Company’s risk management and internal compliance and control systems are operating efficiently and effectively in all material respects. 6. Board Committees Nominations Committee and Remuneration Committee The board believes that to establish a separate Nomination and Remuneration Committees would contribute little to the Company’s effective management. Accordingly the nomination of new directors and the setting, or review, of remuneration levels of directors and senior executives is performed by the Board as a whole and approved by resolution of the Board (with abstentions from relevant directors where there is a conflict of interest). Where the Board considers that particular expertise or information is required, which is not available from within the Board, appropriate external advice may be taken prior to a final decision.
    • CORPORATE GOVERNANCE Discovery Metals Limited Financial Report 2009 Page 55 ABN: 29 104 924 423 7. Remuneration and Performance The Board as a whole deals with the remuneration of directors and key executives of the Company and a separate remuneration committee was deemed not to be required at this stage. The Board’s policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders. Fees for non-executive directors are not linked to the performance of the Consolidated Group. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the directors’ option plan. 8. Conflict of Interest The directors must keep the Company informed, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes a significant conflict exists, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered. 9. Independent Professional Advice Each director has the right of access to all relevant Company information and to the Company’s executives. Directors have the right, in connection with their duties and responsibilities as directors, to seek independent professional advice at the Company’s expense. Prior approval of the Chairman is required, which will not be unreasonably withheld. 10. Code of Conduct The Board has adopted a Code of Conduct to guide executives, management and employees in carrying out their duties and responsibilities. This Code of Conduct sets out the principles and standards which the Board, management and employees of the Company are encouraged to strive towards when dealing with each other, shareholders and the community as a whole. 11. Communication to Market & Shareholders The Board Charter, Code of Conduct and Share Trading Policy all recognise legal and other obligations and support the legitimate interests of all stakeholders. The Board of Directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the directors and the Company. Information is communicated to shareholders and the market through:  the Annual Report which is made available to all shareholders;  other periodic reports which are lodged with ASX and available for shareholder scrutiny;  other announcements made in accordance with ASX Listing Rules;  special purpose information memoranda issued to shareholders as appropriate;  the Annual General Meeting and other meetings called to obtain approval for Board action as appropriate; and  the Company’s website.
    • CORPORATE GOVERNANCE Discovery Metals Limited Financial Report 2009 Page 56 ABN: 29 104 924 423 12. Share Trading Share trading by Company employees is not permitted at any time during black-out periods or whilst in the possession of price sensitive information. Employees of the Company are prohibited from trading in securities whilst in possession of any inside information as per the Corporations Act 2001. 13. External Auditors The external auditor is RSM Bird Cameron Partners. The external auditor attends the Annual General Meeting and part of the agenda is the tabling of the financial statements and inviting shareholders to ask the directors or the auditor any questions with regard to the financial statements and the audit report. The Corporate Governance Policies of the Company will be continually reviewed in accordance with the standards required of the Company by the Directors, the ASX, ASIC and other stakeholders to ensure that appropriate governance standards are maintained. Full details of all of the Company’s corporate governance policies can be viewed at its website – www.discoverymetals.com.au